10. Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. Recording the capital gain on the tax return. 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. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. 31. Taxation Administration Act 1953. 73. ITAA 1997 115-25(1) Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 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. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. 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. Accordingly, the principal asset test in section 855-30 will not be satisfied. ITAA 1997 Div 110 share capital, Legislative References: 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). For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. Make sure you have the information for the right year before making decisions based on that information. ITAA 1997 104-135 The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 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. 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. If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. The capital return was completed on 18December 2003. 20. ITAA 1997 Div 197 A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. 6. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. 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. 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. This is due to the outflow of funds to shareholders. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. The return of capital was considered and approved by shareholders at the 2021 AGM. 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). 34. 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. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. The application of sections 45A, 45B and 45C to the return of capital. Using this method, Maria has made no capital gain on the return of capital, so she does not have to put anything on her 2003-04 tax return to reflect this event. 54. Will my shares be worth less after the capital return? 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). A Wesfarmers shareholder's right to the payment of the return of capital is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. 2. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. according to an ATO ruling. CGT event C2 in section 104-25 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 but which they cease to own before the Payment Date. NO 1-4UM8A44, Related Rulings/Determinations: return of capital on shares ITAA 1997 855-20 For the shares you made a capital gain on - reduce their cost base and reduced cost base to nil. ITAA 1936 45A(3)(b) 4. ITAA 1936 6(1) ITAA 1936 45B(3)(b) ATO references: ITAA 1997 855-10(1) 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. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). Mark purchased 200 Wesfarmers shares in December 2000. If the scheme is not carried out as described, this Ruling cannot be relied upon. 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. Section 45A - streaming of dividends and capital benefits. Did the Dividend Investment Plan (DIP) apply? 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. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. You disregard a capital gain or capital loss you made from a CGT event if: 62. The following is a detailed contents list for this Ruling: ITAA 1997 975-300(3) The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. How did the capital return work and what was the effect on the company? The Class 61. 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. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). ITAA 1936 45B The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. ITAA 1997 Div 110 ITAA 1997 855-30 There was no share consolidation in relation to the capital return. 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 following description of the scheme is based on information provided by the applicant. 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)). There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. Wesfarmers' retained earnings (on a stand-alone basis) for the year ended 30 June 2021 was $697 million post-payment of the final dividend for the year. 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. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . Income tax: Capital management distribution: Wesfarmers Limited . ITAA 1936 6(1) 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. Accordingly, section 45A has no application to the return of capital. 17. By contrast, a dividend would generally be included in the assessable income of a resident shareholder or in the case of a foreign resident, be subject to dividend withholding tax under section 128B. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. The Commissioner will not make a determination under either subsection 45A(2) of the ITAA 1936 or paragraph 45B(3)(b) of the ITAA 1936 that section 45C of the ITAA 1936 applies to any part of the return of capital of $2.00 per Wesfarmers share you received on the Payment Date. 5. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. 44. 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. 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. 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. ITAA 1936 45C What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 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. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. 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. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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 1997 855-15 | August 8, 2022 You received $2.50 for each share that you held on the record date. 57. 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. 28. 22. 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. 21. Australian Taxation Office (ATO) Class Ruling . 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. Wesfarmers shareholders received a $1.00 per share cash distribution. A capital benefit was provided to Wesfarmers' shareholders. 23. 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. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). 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. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 68. How can I calculate my return of capital payment and when will I receive this payment? Accordingly, CGT event G1 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. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Wesfarmers shares at least 12 months before the Payment Date (subsection 115-25(1)), provided the other conditions in Subdivision 115-A are satisfied. For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. 54. ITAA 1997 104-165(3) Taxation Administration Act 1953. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. ITAA 1936 45A(2) 35. 3. Section 45B - schemes to provide capital benefits. 32. The capital gain is equal to the amount of the excess. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. Make sure you have the information for the right year before making decisions based on that information. ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. ITAA 1936 45B(2)(a) 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. 22. ITAA 1936 318 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. 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 855-10 Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. 69. if the cost base (after any adjustment, as may be relevant, for any indexation, any previous return of capital or as a result of the Coles demerger) of a share acquired after 19 September 1985 is less than the return of capital amount (on a cents per share basis), then an immediate capital gain will arise for the difference. 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 cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. . Note: Shares commence trading on an ex return of capital basis. The ATO has issued Class Ruling CR 2018/59 . 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). 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. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. 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. The Payment Date is anticipated to be late November to early December 2013. This represents a total return of approximately $579 million to Wesfarmers shareholders. ITAA 1936 45B(2)(b) 3.7 Cash return of capital amount per +security AUD 2.00000000 Part 4 - Changes to option pricing as a result of the cash return of capital 4.1 Will the cash return of capital affect the exercise price of any +entity-issued options? Wesfarmers Limited (WES) - Demerger . 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 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. 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 ). The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 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. 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). Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 11. 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. 59. 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 return of capital was in addition to the interim dividend of 88 cents per Wesfarmers share paid on 31 March 2021 and a final dividend of 90 cents per share for the year ended 30 June 2021 paid by Wesfarmers on 7 October 2021. NO 1-PVCWOSF, Legislative References: 9. ITAA 1936 45B(8) ITAA 1936 45C(1) 16. ITAA 1997 855-10(1) 64. 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. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 15 to 38 of this Ruling. 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. The capital return was $2.50 per share. There was no dividend component as part of this capital management initiative. 8. 13. Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. Sections 45A and 45B are anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C applies to treat all or part of the return of capital to be received by Wesfarmers shareholders as an unfranked dividend. ITAA 1997 Div 112 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 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. 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. The payment was entirely capital in nature with no dividend component. 9. 38. Annual General Meeting, at which shareholders voted to approve the return of capital. 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. 70. ITAA 1936 45A(3)(b) 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). All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. 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). 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). Copyright Act 1968 If the amount of the return of capital of $2.00 per Wesfarmers share is not more than the cost base of your Wesfarmers share, the Cost base / reduced cost base of the share are reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4)). 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)). In broad terms, section 45B of the ITAA 1936 applies where: 49. 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