10. 42. For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). 24. 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. 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). 56. 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. 25. ITAA 1936 6(1) The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. Commissioner of Taxation 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. 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. ITAA 1997 855-10(1) 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. 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. 64. The Payment Date is anticipated to be late November to early December 2013. 24. ITAA 1997 104-165(3) 33. You received $2.50 for each share that you held on the record date. The return of capital was made possible by the Wesfarmers Groups continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. 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). 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). 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 phrase 'provided with a capital benefit' is defined in subsection 45B(5). 62. ITAA 1997 104-135(3) 4 September 2013. 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. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 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. 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 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. Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. Wesfarmers Limited (WES) - Demerger . The ATO ruling, if The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. Income tax: Capital management distribution: Wesfarmers Limited . 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. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. 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). ITAA 1997 104-25 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. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. Make sure you have the information for the right year before making decisions based on that information. 78. For shares that had reached a taxing point (i.e. 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). CGT event C2 happened to your right to receive the return of capital on the Payment Date when Wesfarmers paid you a return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and ceased to own before the Payment Date (section 104-25). Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. ITAA 1997 116-20(1) The purpose which causes section 45B to apply may be the purpose of any party to the scheme. 2. 64. 75. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. ITAA 1997 Div 197 Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. 15. 52. 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. Record date for determining entitlement to participate in the return of capital. 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. 14. Mark purchased 200 Wesfarmers shares in December 2000. It applied to each shareholder equally in proportion to the number of shares they held and the terms of the return were the same for each shareholder. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. ITAA 1997 Div 112 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). 66. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. 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. 33. 41. The amount of the capital gain is equal to that excess. There was no share consolidation in relation to the capital return. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. The return of capital was announ ATO Class Ruling - return of capital to shareholders. 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 ). Corporations Act 2001 256B 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. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. ITAA 1936 318 Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). This is clearly marked. 63. ITAA 1936 47 If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. 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. 32. ITAA 1997 855-10 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). Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. ITAA 1997 104-25(3) For more information about the tax implications of owning shares, see the following publications: For help applying this information to your own situation, phone us on 132861. Note: 47. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. 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. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. CGT events C1-C3 - end of a CGT asset 19. 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. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. Section 45A applies in circumstances where capital benefits are streamed to certain shareholders (the advantaged shareholders) who derive a greater benefit from the receipt of capital and it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received or will receive dividends. 57. 21. 58. 20. ITAA 1997 104-135(3) sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. 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. 5. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 37. 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. Australian Taxation Office (ATO) Class Ruling . 29. Return of capital amount - $5.68 for each entitled WES share. 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 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. 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. ITAA 1997 Div 110 This is a Tax Office ruling on the tax consequences arising from this return of capital. ITAA 1997 855-10(1) 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. The following tables sets out what method you can use. 4:00pm (Perth time) Friday, 19 November 2021. 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. 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. ITAA 1997 Div 115 The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 2. The following description of the scheme is based on information provided by the applicant. CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 20. 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). At Wesfarmers we believe sustainability is about understanding and managing the ways we impact the communities and environments in which we operate, to ensure that we continue to create value in the future. As the right to receive the payment of the return of capital was inherent in the Wesfarmers share during the time it was owned, the right is considered to have been acquired at the time when the share was acquired (section 109-5 of the ITAA 1997). ITAA 1997 109-5 If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. Since 2009, Wesfarmers has reported the following retained earnings: 17. 46. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. dividend income 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). ATO references: 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). The capital gain is equal to the amount of the excess. The capital loss is equal to the amount of the difference (subsection 104-25(3)). ITAA 1997 855-30 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. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. 6. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. 32. Income tax: Capital management distribution: Wesfarmers Limited . The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). Wesfarmers has obtained a Class Ruling CR 20from the ATO which governs the Australian tax21/87 treatment of the return of capital to Wesfarmers shareholders who hold their shares on capital account. For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. 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'. 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 1936 45C(1) You disregard a capital gain or capital loss you made from a CGT event if: 62. Make sure you have the information for the right year before making decisions based on that information. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. ITAA 1936 45C(2) 65. Some of the information on this website applies to a specific financial year. 30. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. Corporations Act 2001. Aussie supermarkets set to capitalise on high inflation, but softer demand ahead, WESFARMERS LIMITED : Ex-dividend day for interim dividend, Out of lockdown, Kmart pushes Australia's Wesfarmers to higher profit, Transcript : Wesfarmers Limited, H1 2023 Earnings Call, Feb 15, 2023, Wesfarmers Raises Dividend as Fiscal H1 Profit, Revenue Increase, Australian Stock Exchange - 12:10:24 2023-03-01 am EST. 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 discount factor for resident individuals is one-half. 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). 60. 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. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. 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. Please find below some information and frequently asked questions in relation to the 2021capital return. 1. It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. 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. 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. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. 22. 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. Wesfarmers shareholders received a $1.00 per share cash distribution. 8. 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. 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. 68. The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. 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. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. ITAA 1997 855-20 Section 45B - schemes to provide capital benefits. Commissioner of Taxation ITAA 1997 104-165(3) 10. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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. ITAA 1936 45B(9) Recording the capital gain on the tax return. 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. 43. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 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. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. You will make a capital gain under CGT event C2 if the capital proceeds from the ending of the right are more than the cost base of the right. Division 230 does not apply to individuals unless they have made an election for it to apply. 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). 57. The capital return has been approved by the shareholders. . Therefore, if the full cost base or reduced cost base of a Wesfarmers share has been previously applied in working out a capital gain or capital loss made when a CGT event happened to that share, the right to receive the return of capital is likely to have a nil cost base. 55. ITAA 1936 45B(3) Return of capital is not a dividend for income tax purposes. Accordingly, the principal asset test in section 855-30 will not be satisfied. 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. Section 45A - streaming of dividends and capital benefits. It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. 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. 16. ITAA 1936 45A(2) The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. Taxation Administration Act 1953. 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). Components of the capital return The capital return was $2.50 per share. 18. 31. The following description of the scheme is based on information provided by the applicant. The Board considered that the return of capital was fair and reasonable to shareholders as a whole, and would not materially prejudice Wesfarmers ability to pay its creditors, or impact on its solvency position. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 25. If the return of capital is approved by shareholders at the 2013 . Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. 21. 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 method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 31. 36. Shares commence trading on an ex return of capital basis. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. 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 . 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. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. Wesfarmers anticipates that it will pay a fully franked dividend of approximately $1.2 billion ($1.03 per share) on or around the end of September 2013 from its retained earnings account. 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