A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. ITAA 1997 Div 115 44. 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. 33. 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. 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). 33. The Commissioner will not make a determination under either ITAA 1997 104-135(3) 3. 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. 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). ITAA 1997 104-135(3) (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. capital gains tax The purpose which causes section 45B to apply may be the purpose of any party to the scheme. 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 return of capital will be debited to Wesfarmers share capital account. 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. The summary in these documents and in this section is general in nature and should not be relied upon as advice. 31. ITAA 1997 Div 197 38. 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). How do I adjust the cost base and reduced cost base of my Wesfarmers shares? Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. 20. 20. 41. The Payment Date is anticipated to be late November to early December 2013. Return of capital amount - $5.68 for each entitled WES share. 58. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. 40. 65. ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. This is clearly marked. It states that a person is provided with a capital benefit if: 52. The effect of such a determination is that all or part of the return of capital received by Wesfarmers shareholders is treated as an unfranked dividend paid by Wesfarmers out of profits. 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. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. What are the shareholder tax implications of the capital return? ITAA 1997 Subdiv 115-A In particular: 26. dividend income Make sure you have the information for the right year before making decisions based on that information. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. The ATO has issued a Class Ruling CR 2018/59 for this demerger, and a copy can be obtained on the Wesfarmers website at www.wesfarmers.com.au. 22. She must use the indexed cost base method in all future events affecting these shares. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . ITAA 1997 855-20 35. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. : Yes. capital reductions 58. The return of capital was not eligible to participate in the DIP. Annual General Meeting, at which shareholders voted to approve the return of capital. ITAA 1997 855-10(1) Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. The cost base of a Wesfarmers shareholder's right to receive the return of capital is worked out under Division 110 of the ITAA 1997 (modified by Division 112 of the ITAA 1997). 37. 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). 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. 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 1936 45A(3)(b) 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. 1. The only relevant category of taxable Australian property is table item 2 of section 855-15. 10. 46. 16. 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. 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. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . CGT events G1-G3 - shares The following tables sets out what method you can use. For your other shares - reduce the cost base and reduced cost base by $2.50 each. The Record Date for the return of capital is expected to bein late November or early December 2014. 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. ITAA 1936 45B(3) 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 right to receive the payment (being an intangible CGT asset) will end by the right being discharged or satisfied when the payment is made. ITAA 1936 45C(1) 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. 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. 59. 53. . 17. 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. 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. Since 2009, Wesfarmers has reported the following retained earnings: 17. Eligible shareholders received 1 COL share for each WES share owned. ITAA 1936 45B Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. In broad terms, section 45B of the ITAA 1936 applies where: 49. 43. 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. 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. 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? 39. 24. 32. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. 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. For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 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. 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. Section 45A of the ITAA 1936 generally applies where: 45. The capital loss is equal to the amount of the difference (subsection 104-25(3) of the ITAA 1997). ITAA 1997 115-25(1) You disregard a capital gain or capital loss you made from a CGT event if: 62. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. 10. ITAA 1997 115-25(1) After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. Return of capital is not a dividend for income tax purposes. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. 55. 1. 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). 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. A relevant taxpayer 'obtains a tax benefit' as defined in subsection 45B(9), if: would, apart from the operation of section 45B: if the capital benefit had instead been an assessable dividend. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 38. ITAA 1997 Div 112 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). a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 29. TAA 1953 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 ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. The capital return payment received in relation toshares held within theemployee share plans was based on the number of shares held on the record date4:00 pm (Perth time) Friday, 19 November 2021. 81. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 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. 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. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. ITAA 1936 318 ITAA 1997 104-165(3) Shares commence trading on an ex return of capital basis. 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. 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. 2. 6. 23. 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. 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. Each of these conditions is considered in this Ruling. Make sure you have the information for the right year before making decisions based on that information. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. 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. Last date for trading in cum return of capital for shares. 36. Income tax: Capital management distribution: Wesfarmers Limited . 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). 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 ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Please find below some information and frequently asked questions in relation to the 2021capital return. Section 45B - scheme to provide capital benefits. 64. How did the capital return work and what was the effect on the company? 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. Section 45B - schemes to provide capital benefits. You received $2.50 for each share that you held on the record date. 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. 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. 46. 8 December 2021. 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. This Ruling applies from 1 July 2021 to 30 June 2022. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 48. 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 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. 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. Shareholders are sent return of capital payment advice. 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