Please find below some information and frequently asked questions in relation to the 2021capital return. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. This amount represents your capital proceeds. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. ITAA 1936 45C 43. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. 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). 30. Under with section 112-25 of the ITAA 1997, the consolidation of Wesfarmers shares will not result in a CGT event happening where the company converts its shares in accordance with section 254H of the Corporations Act. The summary in these documents and in this section is general in nature and should not be relied upon as advice. The following tables sets out what method you can use. 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. 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). Shares may have traded at a lower price from the ex return of capital date than they otherwise would have done had the return of capital not occurred. ITAA 1997 Div 112 The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. ITAA 1936 47 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. 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. 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. Income tax: Capital management distribution: Wesfarmers Limited . The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. 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). As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). 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. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. ITAA 1936 45B(5) 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 item 1, 2 or 5; an option or right to acquire a CGT asset covered by item 1, 2 or 3, and. 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. 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? Accordingly, section 45A has no application to the return of capital. The capital return has been approved by the shareholders. Corporations Act 2001. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 3. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 36. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. ITAA 1997 855-10 It is anticipated that the share consolidation will have no effect on the value of each shareholder's shares relative to the total market value of Wesfarmers. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. ITAA 1936 318 The term 'share capital account' is defined in section 975-300 as an account which the company keeps of its share capital, or any other account created on or after 1 July 1998 where the first amount credited to the account was an amount of share capital. 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. 58. Did the Dividend Investment Plan (DIP) apply? For the shares you made a capital gain on - reduce their cost base and reduced cost base to nil. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. 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. '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. 22. 38. 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. 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. 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. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. 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). What are the shareholder tax implications of the capital return? 8. 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. Wesfarmers Limited (WES) - Demerger . Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. Specifically, the provision applies where: 48. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. TAA 1953 24. 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 was founded in 1914 and is headquartered in Perth, Australia. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. The capital gain is equal to the amount of the excess. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. 8 December 2021. TAA 1953 Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 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. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. 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. 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). ITAA 1997 115-25(1) 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). The right to receive the payment (being an intangible CGT asset) will end by the right being discharged or satisfied when the payment is made. 78. During the years ended 30 June 2018 to 30 June 2020, Wesfarmers disposed of a number of assets and received sale proceeds totalling $4.3 billion. 14. 39. 9. The following description of the scheme is based on information provided by the applicant. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. 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. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. Create your myGov account and link it to the ATO, Help and support to lodge your tax return, Occupation and industry specific income and work-related expenses, Residential rental properties and holiday homes, Instalment notices for GST and PAYG instalments, Your obligations to workers and independent contractors, Encouraging NFP participation in the tax system, Australian Charities and Not-for-profits Commission, Departing Australia Superannuation Payment, Small Business Superannuation Clearing House, Annual report and other reporting to Parliament, Complying with procurement policy and legislation, Wesfarmers Group Limited (Wesfarmers) return of capital. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. return of capital on shares However, the list of relevant circumstances in subsection 45B(8) is not exhaustive and regard may be had to other circumstances on the basis of their relevance. ATO references: This Ruling applies from 1 July 2013 to 30 June 2014. The effect of such a determination is that all or part of the return of capital received by Wesfarmers shareholders is treated as an unfranked dividend paid by Wesfarmers out of profits. If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. Income tax: Capital management distribution: Wesfarmers Limited . 19. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. It states that a person is provided with a capital benefit if: 52. ITAA 1936 45B(2)(a) Australian Taxation Office for the Commonwealth of Australia. 11. 16. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. Wesfarmers has advised that, at the time CGT event G1 happens for any foreign resident Wesfarmers shareholder who is entitled to the return of capital, a Wesfarmers share will not be an indirect Australian real property interest (as defined in section 855-25 of the ITAA 1997). Accordingly, the principal asset test in section 855-30 will not be satisfied. ITAA 1936 44(1) In particular: 26. Wesfarmers has confirmed that its share capital account (as defined in section 975-300 of the ITAA 1997) is not tainted (within the meaning of Division 197 of the ITAA 1997). 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 Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. Make sure you have the information for the right year before making decisions based on that information. 57. 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). 73. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. ITAA 1997 104-135(4) The return of capital will be affected by way of an equal reduction of capital under section 256B of the Corporations Act 2001 (Corporations Act), and requires shareholder approval by ordinary resolution under section 256C of the Corporations Act. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. The only relevant category of taxable Australian property is table item 2 of section 855-15. For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . . The capital return was $2.50 per share. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. 6. 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. A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. 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). 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. 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 Commissioner will not make a determination under either 2. Wesfarmers raised the following equity to reduce debt and provide balance sheet flexibility: 12. 55. ITAA 1997 Div 112 A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. 20. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. TR 2006/10 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. 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. 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). 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. 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. ATO Class Ruling - return of capital to shareholders. 12. ITAA 1936 45B(3)(b) Shareholders who did not provide the share registry with their bank account details, may complete a paper Direct Credit Payment Form, which is available from Wesfarmers share registry, Computershare Investor Services Pty Limited, or provide their details online to Computershare at www.computershare.com.au/easyupdate/wes. if the cost base (after any adjustment, as may be relevant, for any indexation, any previous return of capital or as a result of the Coles demerger) of a share acquired after 19 September 1985 is less than the return of capital amount (on a cents per share basis), then an immediate capital gain will arise for the difference. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. Return of capital is not a dividend for income tax purposes. 79. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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). the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). 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. This is clearly marked. 31. 29. 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. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. She must use the indexed cost base method in all future events affecting these shares. 61. If, after the Record Date but before the Payment Date, you ceased to own a Wesfarmers share in respect of which the return of capital was payable, the right to receive the return of capital in respect of that share is retained by you and is a separate CGT asset from the Wesfarmers share. Shareholders are sent return of capital payment advice. There was no dividend component as part of this capital management initiative. 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. CGT event G1 happened on the Payment Date when Wesfarmers paid you the return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and continued to own at the Payment Date (section 104-135). 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 high dividend payout policy is intended to be maintained following the return of capital to shareholders. ATO references: 60. a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 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. Return of capital amount - $5.68 for each entitled WES share. ITAA 1997 855-15 Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. ITAA 1997 995-1(1) Section 45A - streaming of dividends and capital benefits. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 40. ITAA 1997 104-135(4) The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 64. Copyright Act 1968 ITAA 1997 995-1(1) Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. 18. 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. ITAA 1997 104-165(3) The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Maria purchased 1,000 Wesfarmers shares in December 1986. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. 69. This payment was: A CGT event happened on 18 December 2003, when Wesfarmers made a capital return on the shares that you held in the company. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. 4. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). 53. 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. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Note: 56. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 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. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 15 to 38 of this Ruling. ITAA 1997 855-30 Corporations Act 2001 256B 3. Section 45A of the ITAA 1936 generally applies where: 45. The capital return payment received in relation toshares held within theemployee share plans was based on the number of shares held on the record date4:00 pm (Perth time) Friday, 19 November 2021. 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: The phrase 'provided with a capital benefit' is defined in subsection 45B(5). The Ruling continues to apply after 30 June 2014 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. ITAA 1936 45C 2. 54. As with dividend payments, payments of the distribution to shareholders with a registered address in Australia, New Zealand and the United Kingdom were made by way of direct credit to a financial institution in Australia, New Zealand or the United Kingdom, as applicable, (including a bank, building society or credit union account). It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). 29. ITAA 1936 44 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. ITAA 1997 104-135(3) All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 2. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 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. The table sets out these five categories of CGT assets: 77. Payments made to credit unions may take longer. Accordingly, the Commissioner will not make a determination under subsection 45B(3) 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. ITAA 1936 45B(2)(b) 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. How can I calculate my return of capital payment and when will I receive this payment? If the amount of the return of capital of $2.00 per Wesfarmers share is not more than the cost base of your Wesfarmers share, the Cost base / reduced cost base of the share are reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4)).