Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. * If you choose to index the cost base of shares you acquired before 21September 1999, you cannot apply the CGT discount when you dispose of them. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). 56. ITAA 1997 Subdiv 115-A For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. 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. ITAA 1997 115-25(1) 10. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 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. 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)). 48. capital gains tax 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. 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). 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. ITAA 1936 45A The capital gain is equal to the amount of the excess. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. 33. 30. ITAA 1936 44 The ATO has issued Class Ruling CR 2018/59 . All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. 6. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). 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 is an Australian-resident company listed on the Australian Securities Exchange since 1984. ITAA 1997 975-300 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. Wesfarmers' return of capital will be recorded as a debit to the share capital account and Wesfarmers shareholders will receive a distribution of share capital to the value of $0.50 per share. ITAA 1936 45B(2)(b) The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. 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. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). Ruling Return of capital is not a dividend 7. 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. 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. This will bring the total dividend for the year to $2.1 billion. 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). 40. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. 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). Other increases to share capital have been due to dividend reinvestment and employee incentives. The following is a detailed contents list for this Ruling: Corporate Archer Materials Limited (ACN: 123 993 233) ATO Class Ruling Lot Fourteen, Frome Road, Adelaide SA 5000 ASX Announcement (ASX: AXE) 16 December 2021 Capital Return - ATO Class Ruling Published Archer Materials Limited ("Archer", the "Company", "ASX:AXE") advises that the Australian Taxation Office has published a Class Ruling (CR 2021/98) (the "Ruling") relating to the . ITAA 1936 45C(1) 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. 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. 47. 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. 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 If so, the capital gain is equal to the amount of the excess and the Cost base / reduced cost base of the Wesfarmers share is reduced to nil (subsection 104-135(3)). 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. 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. Maria's capital gain is $200 ($2,500 - $2,300). 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. 33. 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). 81. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 34. 50. 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. 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 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. Please find below some information and frequently asked questions in relation to the 2021capital return. 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 summary in these documents and in this section is general in nature and should not be relied upon as advice. . NO 1-4UM8A44, Related Rulings/Determinations: 72. Section 45B - scheme to provide capital benefits. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). ITAA 1936 45B(3) 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 . 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 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. Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. 59. . We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. ITAA 1936 45C 63. 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. The right to receive the return of capital, being an intangible asset, ended by the right being discharged or satisfied when the return of capital was made (section 104-25). Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. ITAA 1997 975-300(3) 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 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. 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). 38. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 61. Last date for trading in cum return of capital for shares. 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. ATO Class Ruling - return of capital to shareholders. 35. Annual General Meeting, at which shareholders voted to approve the return of capital. 3. 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. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. 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. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. ATO references: The retained earnings as a proportion of total equity has significantly reduced over the period from the 2005 financial year (16%) to the 2013 financial year (4%), due to the significant amount of share capital that had been raised. 4 September 2013. 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. 21. 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. The Record Date for the return of capital is expected to bein late November or early December 2014. Accordingly, section 45A has no application to the return of capital. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). If the return of capital is approved by shareholders at the 2013 . Specifically, the provision applies where: 48. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. The only relevant category of taxable Australian property is table item 2 of section 855-15. ITAA 1936 45C(2) 38. 1. purchased their shares after the shares started trading on an ex return of capital basis (i.e., from Thursday, 18 November 2021 onwards), the cost base for each share acquired after 19 September 1985 should be reduced by the return of capital amount (on a cents per share basis) for the purpose of calculating any capital gain or capital loss on the ultimate disposal of that share; and. CGT events C1-C3 - end of a CGT asset 21. You 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. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? 70. The capital return was $2.50 per share. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. 5. 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. 29. 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). 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. 82. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . The Record Date for the return of capital is expected to be on 15 November 2013. 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. 30. Components of the capital return The capital return was $2.50 per share. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). She must use the indexed cost base method in all future events affecting these shares. 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. 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. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. ITAA 1936 47 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. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. ITAA 1997 Div 112 Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. 65. 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). 35. The purpose which causes section 45B to apply may be the purpose of any party to the scheme. This Ruling applies from 1 July 2021 to 30 June 2022. ITAA 1936 45B(5)(b) 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'. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. 64. 46. What are the key dates for the capital return? 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: 19. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. ITAA 1997 104-135(3) 22. 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. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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. 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. 36. ITAA 1936 47 Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). Mark received a total of $500 (200 x $2.50) in the return of capital. 66. 43. 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. 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. 28. 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. 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. This represents a total return of approximately $579 million to Wesfarmers shareholders. 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. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. Payments made to credit unions may take longer. ITAA 1997 104-25 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). ITAA 1997 104-165(3) ITAA 1936 45B(9) 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. 9. Depending on the outcome, you may have to include some details on your 2003-04 tax return. The amount of the capital gain is equal to that excess. 32. ITAA 1997 977-50 43. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. 46. ITAA 1997 Div 109-A Make sure you have the information for the right year before making decisions based on that information. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 44. 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). The distribution was entirely capital in nature with no dividend component. ITAA 1997 Div 110 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. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. 74. 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. By . 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'. 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. 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). For your other shares - reduce the cost base and reduced cost base by $2.50 each. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. ITAA 1997 Div 197 Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. 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. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 25. How can I calculate my return of capital payment and when will I receive this payment? 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. Or 45B that section 45C applies to the CGT provisions of the of... Cr 2018/59 the distribution was entirely capital in cash to all shareholders relation to the 2021capital return the dividend... An incidental purpose adjust the cost base is $ 200 ( $ -..., on 08 December 2021 and is solely responsible for the purpose any. 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