What will happen to the number of shares I hold? The payment was entirely capital in nature with no dividend component. 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). 59. according to an ATO ruling. 24. 28. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 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). 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). Some of the information on this website applies to a specific financial year. The summary in these documents and in this section is general in nature and should not be relied upon as advice. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 59. If the return of capital is approved by shareholders at the 2013 . 38. 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. The Commissioner will not make a determination under either 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. Under subsection 855-10(1) of the ITAA 1997, an entity disregards a capital gain or capital loss from a CGT event if they are a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens, and the CGT event happens in relation to a CGT asset that is not 'taxable Australian property'. 25. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. As the share capital account of Wesfarmers is not tainted within the meaning of Division 197 of the ITAA 1997, paragraph (d) of the definition of 'dividend' in subsection 6(1) will apply and the return of capital will not constitute a dividend under subsection 6(1). 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. 14. 34. If the scheme is not carried out as described, this Ruling cannot be relied upon. Shares commence trading on an ex return of capital basis. For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. 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. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). The Class Wesfarmers shareholders received a 200 cents per share cash distribution. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. 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. 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. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. capital gains tax If there was any residual from the return of capital payment after the payment had been applied to your loan balance, the remaining balance was paid directly into your bank account on Thursday, 2 December 2021. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. 57. 68. 2. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. 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. 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. 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. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 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. Corporations Act 2001 256C. 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 following tables sets out what method you can use. ITAA 1997 115-25(1) 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). 65. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. 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. 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. For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital. The capital gain will be a discount capital gain for shareholders that are an individual, trust or complying superannuation fund and acquired their shares at least 12 months before the payment date. The Commissioner will not make a determination under either CGT event G1 in section 104-135 of the ITAA 1997 will happen when Wesfarmers pays the return of capital to a Wesfarmers shareholder in respect of a Wesfarmers share that they own at the Record Date and continue to own at the Payment Date. Last date for trading in cum return of capital for shares. Payments made to credit unions may take longer. 44. Bunnings Limited shareholders offered $11.20 for each Bunnings share or $25.80 plus 2 Wesfarmers shares plus 1 Wesfarmers option ($12.50) for every 4 Bunnings shares 6 Nov 1989 Renounceable rights offer - 1 for 7 at a price of $4.25 per share 13 Jan 1989 Share split - each $1.00 share split into 2 x 50 cent shares 22 Apr 1987 Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. 65. 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? There was no share consolidation in relation to the capital return. 64. 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 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 new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 1. 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. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. The capital loss is equal to the amount of the difference (subsection 104-25(3)). 3. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. 25. 22. 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. 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. 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. ATO references: The Board considered that the return of capital was fair and reasonable to shareholders as a whole, and would not materially prejudice Wesfarmers ability to pay its creditors, or impact on its solvency position. 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. 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. Expand Company Description ATO Class Ruling - return of capital to shareholders StockBot 357,511 posts about a year ago WES released this announcement to the ASX on 8 December 2021, 17:19. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. 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 payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 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. 33. ITAA 1936 47 Section 45B - scheme to provide capital benefits. 35. 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). It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. 41. If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. NO 1-PVCWOSF, Legislative References: A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. 61. ITAA 1997 Div 112 ITAA 1997 116-20(1) 67. 23. . A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. For shares that had reached a taxing point (i.e. 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 amount of the capital gain is equal to that excess. Taxation Administration Act 1953. Copyright Act 1968 The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. 30. Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. 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). ITAA 1997 104-25 20. 53. 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). Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). You made a capital gain when CGT event G1 happened if the return of capital of $2.00 per Wesfarmers share you received was more than the share's cost base (subsection 104-135(3)). 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. CGT event G1 (section 104-135 of the ITAA 1997) happens when. This will bring the total dividend for the year to $2.1 billion. 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. 28. 8. 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 capital return was completed on 18December 2003. 22. 13. If, after the Record Date but before the Payment Date, a Wesfarmers shareholder ceases to own some, or all, of their shares in Wesfarmers, the right to receive the payment of the return of capital in respect of each of the shares disposed of will be retained by the shareholder and is considered to be a separate CGT asset. 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. The capital return was completed on 18 December 2003. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 51. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. A capital benefit was provided to Wesfarmers' shareholders. 81. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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). 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. 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. The Record Date for the return of capital is expected to be on 15 November 2013. TAA 1953 ITAA 1997 855-15 The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 54. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). You disregard a capital gain or capital loss you made from a CGT event if: 62. 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). . 48. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. 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. Section 45A - streaming of dividends and capital benefits. The share consolidation will occur after the return of capital to Wesfarmers shareholders, and will be applied to both the fully paid ordinary shares and the partially protected ordinary shares. ITAA 1997 Div 230 ITAA 1997 855-15 22. The capital return has been approved by the shareholders. The ATO ruling, if 18. ITAA 1997 104-165(3) 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). Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. Shareholders are sent return of capital payment advice. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. The following description of the scheme is based on information provided by the applicant. 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 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. Subsection 44(1) includes in a shareholder's assessable income any dividends, as defined in subsection 6(1), paid to the shareholder out of profits derived by the company from any source (if the shareholder is a resident of Australia) and from an Australian source (if the shareholder is a non-resident of Australia). ITAA 1936 45C The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. For your other shares - reduce the cost base and reduced cost base by $2.50 each. Note: ITAA 1936 6(1) 6. 37. 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. 36. ITAA 1936 45B(3) 24. 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. ato class ruling wesfarmers return of capital. 32. ITAA 1936 45B(9) Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. 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. 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. Collectively, shareholders received a total distribution of approximately $1,143 million. 55. ATO references: The following description of the scheme is based on information provided by the applicant. 66. You received $2.50 for each share that you held on the record date. Mark purchased 200 Wesfarmers shares in December 2000. 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. ITAA 1997 Div 230 AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. Did I have the choice to participate in the capital return? Please find below some information and frequently asked questions in relation to the 2021capital return. Accordingly, if the Wesfarmers share was acquired by the Wesfarmers shareholder at least 12 months before the return of capital was paid, a capital gain from CGT event C2 happening on the ending of the corresponding right may qualify as a discount capital gain under subsection 115-25(1) of the ITAA 1997, provided the other conditions in Division 115 of the ITAA 1997 are satisfied. 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. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. 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. 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. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 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. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. ITAA 1997 975-300 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. Components of the capital return The capital return was $2.50 per share. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. Accordingly, section 45A has no application to the return of capital. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. 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. 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