Record date for determining entitlement to participate in the return of capital. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. ato class ruling wesfarmers return of capital. 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. Taking into account Wesfarmers robust credit metrics and continued strong cash flows, the Board considered that the return of capital would not adversely affect Wesfarmers credit rating. 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). The right to receive the return of capital, being an intangible asset, ended by the right being discharged or satisfied when the return of capital was made (section 104-25). 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. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 56. The return of capital will be debited to Wesfarmers share capital account. The converted shares will have the same date of acquisition as the original shares to which they relate. 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. capital gains tax ITAA 1997 104-135 Payments made to credit unions may take longer. 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 1997 109-5 This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 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. However, paragraph (d) of the definition of dividend excludes a distribution from the meaning of dividend if the amount of the distribution is debited against an amount standing to the credit of the company's share capital account. The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. TAA 1953 She must use the indexed cost base method in all future events affecting these shares. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 44. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 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). 22. 66. 72. 4:00pm (Perth time) Friday, 19 November 2021. The Class Ruling and further details regarding the return of capital can be accessed via the Investor Centre section of the Wesfarmers website at www.wesfarmers.com.au. The return of capital was not eligible to participate in the DIP. 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 will be paid equally to each holder of a Wesfarmers share (being ordinary shares and partially protected ordinary shares) who is registered on the Wesfarmers share register on the Record Date. Demerger tax relief gives certain Wesfarmers shareholders the choice to defer the Australian capital gains tax (CGT) consequences that arise as a result of a Wesfarmers shareholder receiving Coles shares under the demerger. Accordingly, the Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the whole, or a part, of the return of capital. Income tax: Capital management distribution: Wesfarmers Limited . 31. Some of the information on this website applies to a specific financial year. ITAA 1936 45B(2)(b) After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. The return of capital . Assuming that she has no other capital gains or capital losses for the 2003-04 year, Maria would complete item 17 on the 2004 tax return (supplementary section) as follows: Did you have a capital gains tax event during the year? Copyright Act 1968 For the purposes of paragraph 45B(2)(c), the Commissioner is required to consider the 'relevant circumstances' set out in subsection 45B(8) to determine whether any part of the scheme would be entered into for a purpose, other than an incidental purpose, of enabling a relevant taxpayer to obtain a tax benefit. 1. 10. to make a short-term or 'one-off' commercial gain. 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. they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. ITAA 1997 855-10(1) That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. 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. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. Components of the capital return The capital return was $2.50 per share. 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. The uplift factor is worked out by dividing 123.4 by the consumer price index for the December quarter of 1986 (79.8) and is 1.546 (rounded to three decimal places). 26. 3. 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 ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. ITAA 1936 45B(5)(b) The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. 3. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 80. ITAA 1997 975-300(3) This Ruling applies from 1 July 2013 to 30 June 2014. Note: 37. share capital, Legislative References: For those shareholders who are tax residents of Australia and hold their shares on capital account at the time the return of capital is paid, no part of the return of capital should be treated as a dividend for income tax purposes. 58. The following tables sets out what method you can use. The capital loss is equal to the amount of the difference (subsection 104-25(3) of the ITAA 1997). 54. 9. ITAA 1997 Div 115 If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. The return of capital will be paid equally to each holder of a Wesfarmers share who is registered on the Wesfarmers share register on the Record Date. This is clearly marked. 55. 81. There was no dividend component as part of this capital management initiative. 76. ATO references: Some of the information on this website applies to a specific financial year. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 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. ITAA 1936 6(1) 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. Taxation Administration Act 1953. 19. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 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. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). ITAA 1936 45A Other increases to share capital have been due to dividend reinvestment and employee incentives. 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. ITAA 1997 995-1(1) Some of the information on this website applies to a specific financial year. 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. The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. 49. 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. 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 ATO ruling, if A Wesfarmers shareholder who is a foreign resident just before CGT event G1 happens, disregards any capital gain made when CGT event G1 happens if their shares in Wesfarmers are not 'taxable Australian property' (section 855-10 of the ITAA 1997). It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. Last date for trading in cum return of capital for shares. TAA 1953 All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. ITAA 1997 Div 110 25. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. 34. The capital return was $2.50 per share. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . ITAA 1997 Div 230 ITAA 1997 855-20 If the return of capital ($0.50 per fully paid share) is not more than the cost base of the Wesfarmers share at the Payment Date, the cost base and reduced cost base of the share will be reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4) of the ITAA 1997). 36. 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. 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 104-25 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. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. ITAA 1997 Div 110 At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. ITAA 1997 Div 197 30. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. . If you have a New Zealand bank account, the exchange rate that was used to convert the Australian dollar payment into New Zealand dollars was set on the record date. 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. The capital gain is equal to the amount of the excess. Neither Wesfarmers nor any of its officers, employees or advisors assumes any liability or responsibility for advising shareholders about the tax consequences of the return of capital. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. ATO Class Ruling - return of capital to shareholders. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. The following description of the scheme is based on information provided by the applicant. ITAA 1997 104-135(3) How much did I receive and how was the payment made? Wesfarmers credited $12,733 million to its share capital account on the issue of Wesfarmers ordinary shares and partially protected ordinary shares to Coles Group shareholders in part payment for the acquisition of all the issued shares in Coles Group. How do I provide, update or check my bank account details? The summary in these documents and in this section is general in nature and should not be relied upon as advice. 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). The Record Date for the return of capital is expected to bein late November or early December 2014. For those employee shareholders who hold their shares within a New Zealand Wesfarmers employee share plan, are tax residents of New Zealand and only work in New Zealand, it is expected the return of capital payment will be treated as dividend income. 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). 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. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). This will bring the total dividend for the year to $2.1 billion. ITAA 1936 47 This is a Tax Office ruling on the tax consequences arising from this return of capital. ITAA 1936 45A(2) 41. 3. Aussie supermarkets set to capitalise on high inflation, but softer demand ahead, WESFARMERS LIMITED : Ex-dividend day for interim dividend, Out of lockdown, Kmart pushes Australia's Wesfarmers to higher profit, Transcript : Wesfarmers Limited, H1 2023 Earnings Call, Feb 15, 2023, Wesfarmers Raises Dividend as Fiscal H1 Profit, Revenue Increase, Australian Stock Exchange - 12:10:24 2023-03-01 am EST. Therefore, a Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for CGT purposes, and who received the return of capital, can disregard any capital gain made if CGT event G1 happened or disregard any capital gain or capital loss if CGT event C2 happened, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: ITAA 1936 47 For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. Australian Taxation Office for the Commonwealth of Australia. return of capital on shares For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. 61. The application of sections 45A, 45B and 45C to the return of capital. The return of capital satisfies the first two conditions. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. The capital return was completed on 18December 2003. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. This is due to the outflow of funds to shareholders. 58. 4. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. Corporations Act 2001. ITAA 1936 318 The test of purpose is an objective one. Section 45B - scheme to provide capital benefits. 13. 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. 14. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. 60. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? What are the shareholder tax implications of the capital return? In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. How can I calculate my return of capital payment and when will I receive this payment? ITAA 1997 Subdiv 115-A The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. ITAA 1936 45B(3) The purpose which causes section 45B to apply may be the purpose of any party to the scheme. What are the capital gains tax consequences for me? TD 2000/10, Subject References: 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. 37. If the return of capital of $2.00 per Wesfarmers share you received was not more than the cost base of the share, the Cost base / reduced cost base of each share is reduced by the amount of the return of capital (subsection 104-135(4)). Return of capital amount - $5.68 for each entitled WES share. There was no share consolidation as part of this capital management initiative and the number of Wesfarmers shares held by shareholders was not affected by the return of capital. 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 retained earnings as a proportion of total equity has significantly reduced over the period from the 2005 financial year (16%) to the 2013 financial year (4%), due to the significant amount of share capital that had been raised. Australian Taxation Office (ATO) Class Ruling . As a result, you will, in those circumstances, make a capital gain equal to the capital proceeds, being $2.00 per Wesfarmers share owned at the Record Date. . ITAA 1936 45B(2)(c) | August 8, 2022 The ruling applies from 1 July 2021 to 30 June 2022. Maria purchased 1,000 Wesfarmers shares in December 1986. Foreign-resident shareholders able to disregard capital gains tax. Wesfarmers Limited was founded in 1914 and is headquartered in Perth, Australia. It states that a person is provided with a capital benefit if: 52. CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 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