Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. CGT events G1-G3 - shares 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. 40. Section 45A - streaming of dividends and capital benefits. If the return of capital is approved by shareholders at the 2013 . There was no dividend component as part of this capital management initiative. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. CGT event G1 (section 104-135 of the ITAA 1997) happens when. ITAA 1997 855-10(1) ITAA 1936 45B(2)(a) Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. What are the shareholder tax implications of the capital return? Some of the information on this website applies to a specific financial year. 64. Did the Dividend Investment Plan (DIP) apply? Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 53. Section 45B 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. 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. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. ITAA 1997 855-30 TR 2006/10 For participants in the Australian tax exempt share plans or the loan plans the cost base for each share held on behalf of employees should be reduced by the return of capital amount. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 48. 6. 61. 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. WES Indicative Capital Return Timetable Effective Date All trading in WES ETO contracts will be on an adjusted basis effective on the ex-date, Thursday, 18 November 2021. 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). ITAA 1936 45B(2)(c) This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 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). 54. The capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. The Record Date for the return of capital is expected to bein late November or early December 2014. 41. Taxation Administration Act 1953. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. according to an ATO ruling. ITAA 1997 104-25 ITAA 1997 104-165(3) ITAA 1997 855-10 capital gains tax Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. CGT event G1 happened when Wesfarmers made the return of capital to you in respect of Wesfarmers shares you owned at the Record Date and continued to own at the Payment Date (section 104-135). Wesfarmers Limited (WES) - Demerger . Therefore, you can treat a capital gain made when CGT event C2 happened to your right to the payment of the return of capital as a discount capital gain under Subdivision 115-A if you acquired your Wesfarmers share at least 12 months before the Payment Date (subsection 115-25(1)) provided the other conditions in Subdivision 115-A are satisfied. How much did I receive and how was the payment made? This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . 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). In working out the capital gain or capital loss when CGT event C2 happens, the capital proceeds are equal to the amount of the return of capital ($2.00 per Wesfarmers share) (subsection 116-20(1)). ITAA 1997 Div 230 As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. 21. 3. 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. 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. 57. CGT events C1-C3 - end of a CGT asset 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)). Section 45A of the ITAA 1936 generally applies where: 45. 23. 11. 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. 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. 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. 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. Corporations Act 2001 256C. ITAA 1997 Div 197 The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. 33. The capital gain is equal to the amount of the excess. 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. Taxation Administration Act 1953. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. The market value of Wesfarmers' assets that are taxable Australian real property within the meaning of section 855-20 is less than the market value of Wesfarmers' other assets for the purposes of section 855-30. ITAA 1997 Subdiv 115-A 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 Wesfarmers share to which the return of capital relates was acquired by a Wesfarmers shareholder at least 12 months before the payment, a capital gain from CGT event G1 happening 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. 60. 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. 8 December 2021. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. 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). 8. Some of the information on this website applies to a specific financial year. ITAA 1936 45C 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. 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. A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. 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. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. How can I calculate my return of capital payment and when will I receive this payment? NO 1-PVCWOSF, Legislative References: On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. The return of capital was considered and approved by shareholders at the 2021 AGM. To be eligible to receive the return of capital, you needed to be a registered shareholder on the record date for determining entitlements, which was 4.00pm (Perth time) on Friday, 19 November 2021. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 12. The return of capital was not eligible to participate in the DIP. 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. capital reductions 21. 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. 3. 55. 42. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. 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). 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. 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. '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. 75. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. ITAA 1936 47 . 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. ITAA 1997 975-300 ITAA 1936 45A(2) 1. 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). Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. ITAA 1997 Div 230 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. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 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. This payment was: Who this Ruling applies to 4. 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. 15. 57. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). A Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for capital gains tax (CGT) purposes, and 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 under section 855-10, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: 15. This Ruling applies from 1 July 2021 to 30 June 2022. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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. 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. 16. ITAA 1936 45B 5. ITAA 1997 109-5 What are the capital gains tax consequences for me? If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. 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. . ITAA 1936 45B(8) 2. 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). 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. 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. If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. 5. ITAA 1997 855-15 share capital, Legislative References: Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. Some of the information on this website applies to a specific financial year. This is clearly marked. The amount of the capital gain is equal to that excess. 80. 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. 10. ITAA 1997 104-135(3) Return of capital is not a dividend for income tax purposes. 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. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 59. 61. 41. 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. Non-resident shareholders should seek specific advice in relation to the tax consequences arising from the return of capital under the laws of their country of residence. Will my shares be worth less after the capital return? Recording the capital gain on the tax return. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. Maria purchased 1,000 Wesfarmers shares in December 1986. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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). 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. 81. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 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. 23. 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). Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 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). 78. 30. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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. ITAA 1936 45A(3)(b) 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 return of capital was recorded as a debit to Wesfarmers untainted share capital account. NO 1-4UM8A44, Related Rulings/Determinations: Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. 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. 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). ITAA 1997 995-1(1) The application of sections 45A, 45B and 45C to the return of capital. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. The right to receive the payment of the return of capital is one of the rights inherent in a Wesfarmers share at the Record Date. 4:00pm (Perth time) Friday, 19 November 2021. ITAA 1936 6(1) 1. 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. 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. 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. 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. 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. 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. Record date for determining entitlement to participate in the return of capital. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. Return of capital amount - $5.68 for each entitled WES share. 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. By . 66. 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. 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. 20. ITAA 1997 Div 197 All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. 9. 68. Note: Corporations Act 2001. 20. 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). ITAA 1997 115-25(1) 25. 26. 67. The Class ITAA 1997 855-10(1) ITAA 1997 104-25(3) The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. ITAA 1997 115-25(1) ATO references: The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. 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'. 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. In broad terms, section 45B of the ITAA 1936 applies where: 49. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. 47. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). ITAA 1997 977-50 The summary in these documents and in this section is general in nature and should not be relied upon as advice. ITAA 1997 975-300(3) Dividends and capital benefits CR 2003/105W: return of capital as at Annual... 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