1. 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. A CGT asset that is covered by subsection 104-165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident). 5. 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 1936 45B 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 1997 Div 197 For your other shares - reduce the cost base and reduced cost base by $2.50 each. 60. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 2. Mark has not made a capital gain on his shares as a result of the capital return so he does not have to put anything on his 2003-04 tax return to reflect this event. 53. Who this Ruling applies to 4. 64. A Wesfarmers shareholder will make a capital gain if the amount of the return of capital ($0.50 per fully paid share) is more than the cost base of the Wesfarmers share (subsection 104-135(3) of the ITAA 1997). ITAA 1997 Div 110 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. ITAA 1997 104-135 There was no dividend component as part of this capital management initiative. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. Having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme is proposed to be entered into for a more than incidental purpose of enabling a taxpayer to obtain a tax benefit. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. 47. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. Sections 45A and 45B of the ITAA 1936 are two anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C of the ITAA 1936 applies. The amount of the capital gain is equal to that excess. ITAA 1936 47 ITAA 1936 45A(3)(b) Corporations Act 2001. 13. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people, An indirect Australian real property interest not covered by item 5, A CGT asset used at any time in carrying on a business through a permanent establishment in Australia and which is not covered by items 1, 2, or 5, An option or right to acquire a CGT asset covered by items 1, 2 or 3. 3. TAA 1953 The return of capital was not eligible to participate in the DIP. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. to make a short-term or 'one-off' commercial gain. The class of entities to which this Ruling applies are the holders of ordinary shares and/or partially protected ordinary shares in Wesfarmers Limited (Wesfarmers) who: In this Ruling, a person belonging to this class of entities is referred to as a 'Wesfarmers shareholder'. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 28. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. 74. The following description of the scheme is based on information provided by the applicant. ITAA 1997 104-165(3) AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 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). 9. 44. To be eligible to receive the return of capital, you needed to be a registered shareholder on the record date for determining entitlements, which was 4.00pm (Perth time) on Friday, 19 November 2021. 21. ITAA 1997 104-135 CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. 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. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. Wesfarmers operates a diverse business which covers home improvement, office supplies, department stores and an industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. 18. Wesfarmers derived a net profit after tax of $1.335 billion from the disposal of the assets, which was paid to shareholders as special dividends in April 2019 and October 2020. purchased their shares after the shares started trading on an ex return of capital basis (i.e., from Thursday, 18 November 2021 onwards), the cost base for each share acquired after 19 September 1985 should be reduced by the return of capital amount (on a cents per share basis) for the purpose of calculating any capital gain or capital loss on the ultimate disposal of that share; and. ITAA 1997 975-300(3) 26. ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 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. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. 78. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. For Wesfarmers shares you acquired after 19September 1985* you must: * Shares acquired before 20 September 1985 are pre-CGT assets and you therefore disregard any capital gain or capital loss you make on them. Section 45A applies in circumstances where capital benefits are streamed to certain shareholders (the advantaged shareholders) who derive a greater benefit from the receipt of capital and it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received or will receive dividends. If the scheme is not carried out as described, this Ruling cannot be relied upon. You have made a capital gain if your cost base per share on the record date (15December 2003) was less than the amount you received for each share ($2.50). For participants in all other Australian employee share plans, the tax implications are as follows: For shares that had not reached their ESS deferred taxing point at the time of the return of capital payment (i.e. Accordingly, the principal asset test in section 855-30 will not be satisfied. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. ITAA 1997 995-1(1) 10. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). ITAA 1997 104-25(3) What are the capital gains tax consequences for me? On 27 August 2021, Wesfarmers announced that it will return share capital to Wesfarmers shareholders of $2.00 per Wesfarmers share totalling $2.3 billion (return of capital). No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. Shareholders are sent return of capital payment advice. 31. Did I have the choice to participate in the capital return? 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. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. The following description of the scheme is based on information provided by the applicant. ITAA 1936 45C The distribution was entirely capital in nature. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. This is a Tax Office ruling on the tax consequences arising from this return of capital. 44. 11. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. Where the original shares were acquired on or after 20 September 1985, subsection 112-25(4) of the ITAA 1997 provides that each element of the cost base and reduced cost base of the converted shares is the sum of the corresponding elements of each original share. ATO references: 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. In working out the capital gain or capital loss made when CGT event C2 happens, the capital proceeds will be the amount of the return of capital ($0.50 per fully paid share) (subsection 116-20(1) of the ITAA 1997). 2. 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 ). 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. Payments made to credit unions may take longer. Depending on the outcome, you may have to include some details on your 2003-04 tax return. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. At Wesfarmers we believe sustainability is about understanding and managing the ways we impact the communities and environments in which we operate, to ensure that we continue to create value in the future. 71. Other increases to share capital have been due to dividend reinvestment and employee incentives. ITAA 1936 45B(2)(b) Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. Without the capital return or some other capital management initiative, we estimate that the ratio would be around 44 per cent at the end of the current financial year." Mr Chaney said the tax office had provided a written draft class ruling at the end of last week, enabling the Board to consider the issue at today's meeting. For example, if you held 1,000 shares as at the record date, you received 1,000 x $2.00 or $2,000 as the return of capital payment. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. 46. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. Since 2009, Wesfarmers has reported the following retained earnings: 17. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. 48. 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. Wesfarmers' retained earnings (on a stand-alone basis) for the year ended 30 June 2021 was $697 million post-payment of the final dividend for the year. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. Therefore, if the cost base or reduced cost base of the share previously owned by you has been fully applied in working out a capital gain or capital loss on the share, the right to receive the return of capital will have a nil cost base. Unless the amount of the distribution exceeds the cost base of the shares, there will only be a cost base reduction under CGT event G1 (section 104-135 of the ITAA 1997). Under the return of capital, all shareholders were treated in the same manner. Wesfarmers Chemicals, Energy and Fertilisers, People development, diversity and inclusion, Chairman and Managing Director's 2022 sustainability message, Bunnings collaborates with Indigenous artists through exclusive plant pots range, Bunnings support for flood affected communities, Bunnings launches national battery recycling programs, Bunnings expands fleet with all electric trucks, Information for participants of the Wesfarmers employee share plans. Wesfarmers Limited (WES) - Demerger . This is clearly marked. ITAA 1997 Div 112 22. The capital return distribution was paid on Thursday, 2 December 2021. This payment was: 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). Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 32. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. Australian Taxation Office (ATO) Class Ruling . Return of Capital Wesfarmers proposes to make a cash payment to shareholders of A$0.50 per ordinary share and partially protected share as a return of capital. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 19. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 49. 33. 57. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. Section 45A of the ITAA 1936 generally applies where: 45. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 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. Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 37. The capital gain will be a discounted capital gain for shares allocated at least 12 months before the payment date of Thursday, 2 December 2021. The Commissioner will not make a determination under either The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 1. 41. If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. 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 ATO has issued Class Ruling CR 2018/59 . The converted shares will have the same date of acquisition as the original shares to which they relate. 41. If you provided your direct credit payment instructions by 4:00pm (Perth time) on Friday, 19November2021, the return of capital payment was made on Thursday, 2 December 2021 by direct credit to your financial institution if your registered address is in Australia, New Zealand or the UK. 22. The principal asset test is passed in the case of shares in a company if the sum of the market values of the company's assets that are taxable Australian real property exceed the sum of the market values of the company's other assets. ITAA 1997 977-50 The ruling has determined that the funds will be distributed via a return of capital of 75c per share and a fully franked dividend of 25c. The capital return was $2.50 per share. The Class 43. ITAA 1997 855-20 62. Corporate Archer Materials Limited (ACN: 123 993 233) ATO Class Ruling Lot Fourteen, Frome Road, Adelaide SA 5000 ASX Announcement (ASX: AXE) 16 December 2021 Capital Return - ATO Class Ruling Published Archer Materials Limited ("Archer", the "Company", "ASX:AXE") advises that the Australian Taxation Office has published a Class Ruling (CR 2021/98) (the "Ruling") relating to the . 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. ITAA 1936 45C(1) A capital benefit was provided to Wesfarmers' shareholders. The capital return was completed on 18 December 2003. The Payment Date is anticipated to be in mid to late December 2014. 70. She must use the indexed cost base method in all future events affecting these shares. ITAA 1936 318 ITAA 1997 109-5 Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. However, the circumstances of the return of capital indicate that there was no streaming of capital benefits to some Wesfarmers' shareholders and dividends to other Wesfarmers' shareholders. 31. ITAA 1997 855-15 Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). 21. ITAA 1997 Div 112 60. 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). ITAA 1936 45B(3) Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. 39. 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. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. The table sets out these five categories of CGT assets: 77. 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. 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. The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. CGT event G1 happened when Wesfarmers made the return of capital to you in respect of Wesfarmers shares you owned at the Record Date and continued to own at the Payment Date (section 104-135). ITAA 1936 45A(2) 29. The right to receive the payment of the return of capital is one of the rights inherent in a Wesfarmers share at the Record Date. You received $2.50 for each share that you held on the record date. All registered shareholders on the record date received the capital return there was not an opportunity for these shareholders to 'opt out' of the capital return. Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. How do I provide, update or check my bank account details? Will my shares be worth less after the capital return? ITAA 1997 104-25(3) TAA 1953 Our diverse business operations cover: home improvement and outdoor living; apparel and general merchandise; office supplies;health, beauty and wellbeing; and an Industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. 2. 12. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . Copyright Act 1968 65. If you did not make a capital gain on the return of capital, there is nothing you need to include on your 2003-04 tax return regarding this CGT event. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 8 to 30 of this Ruling. Income tax: Capital management distribution: Wesfarmers Limited . The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. 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. 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. 54. ITAA 1997 Div 230 80. The test of purpose is an objective one. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). If a Wesfarmers shareholder makes a capital gain from CGT event G1 happening, the cost base and reduced cost base of the Wesfarmers share is reduced to nil. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. You will make a capital gain from CGT event G1 happening if the amount of the return of capital of $2.00 per Wesfarmers share is more than the cost base of your Wesfarmers share. WES Indicative Capital Return Timetable Effective Date All trading in WES ETO contracts will be on an adjusted basis effective on the ex-date, Thursday, 18 November 2021. 10. . 28. 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