22. 21. 32. The capital gain is equal to the amount of the excess. The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). | August 8, 2022 Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 25. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. ITAA 1997 116-20(1) You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. 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). according to an ATO ruling. Annual General Meeting, at which shareholders voted to approve the return of capital. 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). ITAA 1936 45B(9) 39. 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. 72. 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. 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). 20. For your other shares - reduce the cost base and reduced cost base by $2.50 each. 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. Make sure you have the information for the right year before making decisions based on that information. ITAA 1997 855-10(1) As Wesfarmers has a high dividend payout ratio and distributes, where possible, available franking credits, a return of capital was seen as the most efficient distribution of capital to shareholders. 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). NO 1-PVCWOSF, Legislative References: Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. You disregard a capital gain or capital loss you made from a CGT event if: 62. Section 45A - streaming of dividends and capital benefits. 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). 31. 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 distribution was entirely capital in nature. The capital return has been approved by the shareholders. 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. 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. 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. NO 1-4UM8A44, Related Rulings/Determinations: Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). . 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 . Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 5. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. 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. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. Shares commence trading on an ex return of capital basis. 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. 49. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 35. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. ITAA 1997 116-20(1) ITAA 1997 Div 230 23. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 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'. 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. Taxation Administration Act 1953. The cost base of a Wesfarmers shareholder's right to receive the return of capital is worked out under Division 110 of the ITAA 1997 (modified by Division 112 of the ITAA 1997). 35. 25. 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. 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). How can I calculate my return of capital payment and when will I receive this payment? Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 24. 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. 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. 3. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. to make a short-term or 'one-off' commercial gain. ITAA 1997 855-10 11. How do I provide, update or check my bank account details? The Class 45. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. If the scheme is not carried out as described, this Ruling cannot be relied upon. She must use the indexed cost base method in all future events affecting these shares. Did the Dividend Investment Plan (DIP) apply? The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 75. ITAA 1997 Div 112 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. 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 cost base of the right does not include the cost base or reduced cost base of the share previously owned by the Wesfarmers shareholder that has been applied in working out a capital gain or capital loss made when a CGT event happened to the share - for example, when the Wesfarmers shareholder disposed of the share after the Record Date. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. The Payment Date is anticipated to be in mid to late December 2014. 54. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. 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. 79. Return of capital amount - $5.68 for each entitled WES share. The following description of the scheme is based on information provided by the applicant. 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. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. Who this Ruling applies to 4. 38. Did I have the choice to participate in the capital return? If the return of capital is approved by shareholders at the 2013 . 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 the right to receive the payment of the return of capital was inherent in the Wesfarmers share during the time it was owned, the right is considered to have been acquired at the time when the share was acquired (section 109-5 of the ITAA 1997). 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. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 61. The amount of the capital gain is equal to that excess. 47. Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. This represents a total return of approximately $579 million to Wesfarmers shareholders. ITAA 1936 45B(8) 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 1936 45A(2) The proportion of funding from each source was determined having regard to the most cost-effective source of funding available as at the date of payment. 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. 58. 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. Wesfarmers anticipates that it will pay a fully franked dividend of approximately $1.2 billion ($1.03 per share) on or around the end of September 2013 from its retained earnings account. 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. ITAA 1936 45A TAA 1953 The Commissioner will not make a determination under either 64. ITAA 1936 45A(3)(b) ITAA 1997 855-10(1) If Maria chooses the discount method, she calculates her capital gain by subtracting her cost base from the amount she received in the return of capital. 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. There was no dividend component as part of this capital management initiative. 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. It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. For information on the different methods you can use to work out your capital gain, see the Guide to capital gains tax. As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. ITAA 1997 109-5 11. 61. ITAA 1997 104-165(3) 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. This is due to the outflow of funds to shareholders. Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). This Ruling sets out the income tax consequences for shareholders of Wesfarmers Limited (Wesfarmers) who received the return of capital payment of $2.00 per ordinary share on 2 December 2021 (Payment Date). 31. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. Ruling Return of capital is not a dividend 7. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. ITAA 1997 975-300 Depending on the outcome, you may have to include some details on your 2003-04 tax return. 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 1936 45B(2)(a) 37. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. CGT events G1-G3 - shares 69. ITAA 1997 104-165(3) ITAA 1997 975-300(3) The ruling applies from 1 July 2021 to 30 June 2022. This is clearly marked. 13. Make sure you have the information for the right year before making decisions based on that information. Please find below some information and frequently asked questions in relation to the 2021capital return. 41. CGT event C2 happened when the return of capital was made. 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. ITAA 1997 855-10 30. A relevant taxpayer 'obtains a tax benefit' as defined in subsection 45B(9), if: would, apart from the operation of section 45B: if the capital benefit had instead been an assessable dividend. Collectively, shareholders received a total distribution of approximately $1,143 million. The test of purpose is an objective one. 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). ATO Class Ruling - return of capital to shareholders. The cost base of the right does not include the cost base or reduced cost base of the share previously owned by you to the extent that it was applied in working out a capital gain or capital loss made when a CGT event happened to the share; for example, when you disposed of the share after the Record Date and before the Payment Date. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. 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. This Ruling applies from 1 July 2021 to 30 June 2022. In the event that the return of capital did represent a dividend rather than a capital benefit, it is likely that a Wesfarmers shareholder would incur a greater tax liability. 10. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. Commissioner of Taxation Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. 25. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. 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. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Wesfarmers Limited (WES) - Demerger . Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). ITAA 1936 45C(1) 60. 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 2. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. 21. The following description of the scheme is based on information provided by the applicant. 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 distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. 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. 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. Shares in Wesfarmers will be 'an indirect Australian real property interest' if (among other things) they pass the principal asset test in section 855-30. ITAA 1997 104-135(3) 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 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. Under the return of capital, all shareholders were treated in the same manner. CGT events C1-C3 - end of a CGT asset The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 71. 1. 20. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. ITAA 1997 855-15 37. 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. ITAA 1997 104-25(3) 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: 55. 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. Commissioner of Taxation 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)). This Ruling applies from 1 July 2013 to 30 June 2014. 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. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. 25. However paragraph (d) of the definition of dividend specifically 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 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). It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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 application of sections 45A, 45B and 45C to the return of capital. ITAA 1997 104-25 41. . The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. 19. 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. return of capital on shares 53. 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 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. ITAA 1936 45B What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 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