The capital gain is equal to the amount of the excess. ATO references: 42. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). The discount factor for resident individuals is one-half. ITAA 1997 104-135 Corporations Act 2001. Since 2009, Wesfarmers has reported the following retained earnings: 17. 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). He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 11. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. 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)). a CGT asset that is covered by subsection 104-165(3) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). ITAA 1997 855-10(1) 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. 14. 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. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. CGT events C1-C3 - end of a CGT asset The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. TAA 1953 You received 200 cents for every share you held as a registered holder on the record date of 4:00pm (Perth time) Friday, 19 November 2021. 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. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. ITAA 1997 Div 230 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). 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. Depending on the outcome, you may have to include some details on your 2003-04 tax return. 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. 3. This Ruling applies from 1 July 2013 to 30 June 2014. ITAA 1997 Div 197 ITAA 1997 Div 110 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. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. 64. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. ITAA 1936 45A(3)(b) ITAA 1997 104-135 capital reductions 57. Components of the capital return The capital return was $2.50 per share. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. 6. 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)). Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Accordingly, the principal asset test in section 855-30 will not be satisfied. 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. 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. 78. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling 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. 46. 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. 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. 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. The Record Date for the return of capital is expected to bein late November or early December 2014. ITAA 1936 45B(2)(a) 62. ITAA 1997 104-165(3) Having regard to Wesfarmers strong balance sheet and cash flow generation, together with its wellestablished funding sources and robust credit metrics, the Board was of the opinion that, consistent with Wesfarmers growth strategy, Wesfarmers was able to undertake the return of capital without materially prejudicing its ability to fund new investments, or to take advantage of value accretive opportunities, if they arise. This Ruling applies from 1 July 2021 to 30 June 2022. This is clearly marked. 35. However, having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme was entered into or carried out for a more than incidental purpose of enabling Wesfarmers shareholders to obtain a tax benefit. 58. . 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 return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. For shares that had reached a taxing point (i.e. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). 54. Taxation Administration Act 1953. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 70. The capital return was completed on 18December 2003. The Commissioner will not make a determination under either Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. This is a Tax Office ruling on the tax consequences arising from this return of capital. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). If you have a New Zealand bank account, the exchange rate that was used to convert the Australian dollar payment into New Zealand dollars was set on the record date. Section 45B - schemes to provide capital benefits. ITAA 1997 104-135(3) NO 1-PVCWOSF, Legislative References: 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. 56. 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. Some of the information on this website applies to a specific financial year. 20. Return of Capital = $750 Fully Franked Dividend = $250 Units on hand after consolidation: 983 (1000 x 0.9827 - rounded to the next whole number of shares - See Point 25 in the ATO Class Ruling 2014/76 ). 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. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. ITAA 1936 45B(2)(b) 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. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 65. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. 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). This represents a total return of approximately $579 million to Wesfarmers shareholders. 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. For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 54. 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. 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. 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). 61. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. Did I have the choice to participate in the capital return? 3. Make sure you have the information for the right year before making decisions based on that information. 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. 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. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. 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. 10. . 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. 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. In broad terms, section 45B of the ITAA 1936 applies where: 49. 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). All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 34. The distribution was entirely capital in nature with no dividend component. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 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 . ITAA 1997 975-300(3) ITAA 1997 104-25(3) Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. ITAA 1997 855-15 38. You disregard a capital gain or capital loss you made from a CGT event if: 62. 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). 61. If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. 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. 8 December 2021. 47. Return of capital amount - $5.68 for each entitled WES share. 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. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. ITAA 1936 6(1) Section 45A - streaming of dividends and capital benefits. 1. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. This is clearly marked. 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