The return of capital was an equal reduction of capital under section 256B of the Corporations Act 2001 and required shareholder approval by ordinary resolution under section 256C of the Corporations Act 2001. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 40. 21. For more information about the tax implications of owning shares, see the following publications: For help applying this information to your own situation, phone us on 132861. ITAA 1936 45B(3)(b) 32. The Commissioner will not make a determination under either Wesfarmers shareholders received a $1.00 per share cash distribution. The distribution was entirely capital in nature. By . Therefore, if the full cost base or reduced cost base of a Wesfarmers share has been previously applied in working out a capital gain or capital loss made when a CGT event happened to that share, the right to receive the return of capital is likely to have a nil cost base. ITAA 1997 855-10 ITAA 1997 115-25(1) This payment was: ATO Class Ruling - return of capital to shareholders. ITAA 1997 855-30 At 30 June 2007, Wesfarmers' share capital was $2,256 million, with retained earnings of $1,131 million (effectively $588 million after the final 2007 dividend of $543 million). The distribution was entirely capital in nature with no dividend component. 21. If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. 38. 3.7 Cash return of capital amount per +security AUD 2.00000000 Part 4 - Changes to option pricing as a result of the cash return of capital 4.1 Will the cash return of capital affect the exercise price of any +entity-issued options? ITAA 1997 104-25 ATO references: 18. ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. capital gains tax The Commissioner will not make a determination under either subsection 45A(2) of the ITAA 1936 or paragraph 45B(3)(b) of the ITAA 1936 that section 45C of the ITAA 1936 applies to any part of the return of capital of $2.00 per Wesfarmers share you received on the Payment Date. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 22. 43. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. ITAA 1997 Div 230 58. She must use the indexed cost base method in all future events affecting these shares. 20. Return of Capital = $750 Fully Franked Dividend = $250 Units on hand after consolidation: 983 (1000 x 0.9827 - rounded to the next whole number of shares - See Point 25 in the ATO Class Ruling 2014/76 ). These included the divestment of Wesfarmers interest in the Bengalla coal mining joint venture, Curragh coal mine, Kmart Tyre & Auto, Quadrant Energy and 10.1 per cent of Wesfarmers post-demerger 15 per cent shareholding in Coles. You will make a capital gain under CGT event C2 if the capital proceeds from the ending of the right are more than the cost base of the right. Following the payment of the special dividends, Wesfarmers determined that $2.3 billion of the remaining balance of the proceeds from the asset disposals of approximately $2.925 billion was surplus to its capital requirements. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. 31. Wesfarmers provided separate information in relation to the tax implications of the return of capital payment for participants who were located within Hong Kong and India at the time of the capital return payment. The following is a detailed contents list for this Ruling: ITAA 1997 104-135(3) It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. ITAA 1936 45C ITAA 1997 Div 110 You calculate your capital gain using the: Indexed cost base or discount method, whichever gives you the better result*, On or after 21 September 1999 and before 15December 2002, Discount method (after applying any capital losses - including unapplied capital losses from previous years). 65. Australian Taxation Office (ATO) Class Ruling . If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. 25. 22. 45. return of capital on shares The Australian Taxation Office (ATO) has published a Class Ruling in relation to the taxation treatment of the $2.00 per share return of capital to Wesfarmers shareholders, which was paid on 2 December 2021. 14 December 2018 Demerger of Coles Group Limited - ATO Class Ruling The Australian Commissioner of Taxation has today issued Class Ruling CR 2018/59 (Class Ruling) covering the Australian income tax implications of the demerger of Coles Group Limited (Coles) for shareholders of Wesfarmers Limited (Wesfarmers).The Class Ruling confirms the availability of demerger tax relief for certain . ITAA 1936 45A 8 December 2021. 34. The assets disposed of were Wesfarmers' interests in Wesfarmers Bengalla Pty Ltd, Wesfarmers Curragh Pty Ltd, Tyre & Auto Pty Ltd and Quadrant Energy Holdings Pty Ltd, as well as 10.1% of Wesfarmers' 15% shareholding in Coles Group Limited. ITAA 1936 45B(5)(b) 'Share capital account' is defined in section 975-300 of the ITAA 1997 as an account which the company keeps of its share capital, or any other account created after 1 July 1998 where the first amount credited to the account was an amount of share capital. Did the Dividend Investment Plan (DIP) apply? The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. The capital gain is equal to the amount of the excess. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. 9. This represents a total return of approximately $579 million to Wesfarmers shareholders. Specifically, the provision applies where: 48. The purpose which causes section 45B to apply may be the purpose of any party to the scheme. Did I have the choice to participate in the capital return? A Wesfarmers shareholder will make a capital loss if the capital proceeds from the ending of the right are less than the reduced cost base of the right. shares held within the Deferred Plans at the time of the return of capital payment), the cost base for each share held on behalf of employees was reduced by the return of capital amount. A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. 41. The return of capital was made possible by the Wesfarmers Groups continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. Having regard to Wesfarmers strong balance sheet and cash flow generation, together with its wellestablished funding sources and robust credit metrics, the Board was of the opinion that, consistent with Wesfarmers growth strategy, Wesfarmers was able to undertake the return of capital without materially prejudicing its ability to fund new investments, or to take advantage of value accretive opportunities, if they arise. For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). The return of capital was announced on 27 August 2021 and was approved by shareholders at the Wesfarmers Annual General Meeting on 21 October 2021. ITAA 1997 104-135(4) Wesfarmers Limited (WES) - Demerger . AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. Taxation Administration Act 1953. The return of capital was in addition to the interim dividend of 88 cents per Wesfarmers share paid on 31 March 2021 and a final dividend of 90 cents per share for the year ended 30 June 2021 paid by Wesfarmers on 7 October 2021. It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. 19. For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Wesfarmers shares at least 12 months before the Payment Date (subsection 115-25(1)), provided the other conditions in Subdivision 115-A are satisfied. 41. TD 2000/10, Subject References: The capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. How did the capital return work and what was the effect on the company? The term 'dividend' is defined in subsection 6(1) of the ITAA 1936 and includes any distribution made by a company to any of its shareholders. The capital loss is equal to the amount of the difference (subsection 104-25(3)). This is due to the outflow of funds to shareholders. ITAA 1997 Div 197 Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. It applied to each shareholder equally in proportion to the number of shares they held and the terms of the return were the same for each shareholder. If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. ITAA 1936 6(1) Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital. 80. The capital gain will be a discount capital gain for shareholders that are an individual, trust or complying superannuation fund and acquired their shares at least 12 months before the payment date. 11. 34. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . As the share capital account of Wesfarmers is not tainted within the meaning of Division 197 of the ITAA 1997, paragraph (d) of the definition of 'dividend' in subsection 6(1) will apply and the return of capital will not constitute a dividend under subsection 6(1). A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). The question is whether it would be concluded that a person who entered into or carried out the scheme did so for the purpose of obtaining a tax benefit for the relevant taxpayer in respect of the capital benefit. 30. However, having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme was entered into or carried out for a more than incidental purpose of enabling Wesfarmers shareholders to obtain a tax benefit. No part of the return of capital paid to you by Wesfarmers on the Payment Date is a dividend as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). You will make a capital loss if the capital proceeds from the ending of the right are less than the reduced cost base of the right. 31. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. Annual General Meeting, at which shareholders voted to approve the return of capital. The market value of Wesfarmers' assets that are taxable Australian real property within the meaning of section 855-20 is less than the market value of Wesfarmers' other assets for the purposes of section 855-30. 39. For participants in the Australian tax exempt share plans or the loan plans the cost base for each share held on behalf of employees should be reduced by the return of capital amount. ITAA 1997 104-165(3) This Ruling applies from 1 July 2021 to 30 June 2022. Sections 45A and 45B are anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C applies to treat all or part of the return of capital to be received by Wesfarmers shareholders as an unfranked dividend. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. You received 200 cents for every share you held as a registered holder on the record date of 4:00pm (Perth time) Friday, 19 November 2021. 50. Wesfarmers has advised the total market value of its assets that are not taxable Australian real property is greater than the market value of its taxable Australian real property assets. Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). Return of capital is not a dividend for income tax purposes. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . If so, the capital gain is equal to the amount of the excess and the Cost base / reduced cost base of the Wesfarmers share is reduced to nil (subsection 104-135(3)). If you made a capital gain on this CGT event, you must include it in your calculations when completing item 17 on your 2003-04 tax return (supplementary section). This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 3. Shareholders are sent return of capital payment advice. ITAA 1997 104-135 dividend income The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. For more information on how to work out the cost base and the reduced cost base of shares, see the Guide to capital gains tax. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). By contrast, a dividend would generally be included in the assessable income of a resident shareholder or in the case of a foreign resident, be subject to dividend withholding tax under section 128B. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. The share consolidation will occur after the return of capital to Wesfarmers shareholders, and will be applied to both the fully paid ordinary shares and the partially protected ordinary shares. any gain or loss you made on the shares is a capital gain or capital loss - this means that you held your shares as an investment asset. ITAA 1936 45B(2)(c) On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. Wesfarmers has consistently maintained a high dividend payout ratio, with an average payout ratio of approximately 90% since 2009, and has also paid special dividends where it has disposed of assets. Wesfarmers' return of capital will be recorded as a debit to the share capital account and Wesfarmers shareholders will receive a distribution of share capital to the value of $0.50 per share. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. As such, paragraph (d) of the definition of 'dividend' in subsection 6(1) of the ITAA 1936 applies and the return of capital is not a dividend. ITAA 1936 45B(3) For information on the different methods you can use to work out your capital gain, see the Guide to capital gains tax. The capital return distribution was paid on Thursday, 2 December 2021. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 5. This is clearly marked. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 55. Copyright Act 1968 Payments made to credit unions may take longer. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. Please find below some information and frequently asked questions in relation to the 2021capital return. 42. 28. 8. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. ITAA 1997 855-10 This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. a CGT asset that is covered by subsection 104-165(3) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). Each of these conditions is considered in this Ruling. Maria purchased 1,000 Wesfarmers shares in December 1986. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited, Personal investors guide to capital gains tax, Aboriginal and Torres Strait Islander people, you are an Australian resident for tax purposes, you held shares in Wesfarmers and received the return of capital in December2003, you did not acquire your shares under an employee share scheme, and. TAA 1953 40. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). 28. This amount represents your capital proceeds. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. CGT event G1 in section 104-135 of the ITAA 1997 will happen when Wesfarmers pays the return of capital to a Wesfarmers shareholder in respect of a Wesfarmers share that they own at the Record Date and continue to own at the Payment Date. Wesfarmers has obtained a Class Ruling CR 20from the ATO which governs the Australian tax21/87 treatment of the return of capital to Wesfarmers shareholders who hold their shares on capital account. 29. 69. The application of sections 45A, 45B and 45C to the return of capital. Wesfarmers raised the following equity to reduce debt and provide balance sheet flexibility: 12. For those employee shareholders who hold their shares within an Australian Wesfarmers employee share plan, are tax residents of Australia, only work in Australia and hold their shares on capital account at the time the return of capital was paid, the tax implications of the return of capital are as follows: Following the payment date, Wesfarmers provided Australian participants with a statement that set out the taxation implications of the return of capital payment and where applicable information in relation to any cost base adjustments. 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