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. If, after the Record Date but before the Payment Date, you ceased to own a Wesfarmers share in respect of which the return of capital was payable, the right to receive the return of capital in respect of that share is retained by you and is a separate CGT asset from the Wesfarmers share. She must use the indexed cost base method in all future events affecting these shares. 4 September 2013. CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 10. The only relevant category of taxable Australian property is table item 2 of section 855-15. 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)). Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. ITAA 1997 855-10 For participants in all other Australian employee share plans, the tax implications are as follows: For shares that had not reached their ESS deferred taxing point at the time of the return of capital payment (i.e. 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. 32. * 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. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 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. 46. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. The return of capital was announ The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. 22. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. This Ruling applies from 1 July 2021 to 30 June 2022. ITAA 1997 975-300(3) 60. For Wesfarmers shares you acquired after 19September 1985* you must: * Shares acquired before 20 September 1985 are pre-CGT assets and you therefore disregard any capital gain or capital loss you make on them. 2. 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. This is clearly marked. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 61. 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. 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. 21. In working out the capital gain or capital loss made when CGT event C2 happens, the capital proceeds will be the amount of the return of capital ($0.50 per fully paid share) (subsection 116-20(1) of the ITAA 1997). All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. ITAA 1997 855-10(1) Make sure you have the information for the right year before making decisions based on that information. 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). 41. 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. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. Accordingly, section 45A has no application to the return of capital. The application of sections 45A, 45B and 45C to the return of capital. 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. 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'. . 34. 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. 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. 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. This is due to the outflow of funds to shareholders. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. By . The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. capital gains tax dividend income The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). 33. 3. 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. What are the key dates for the capital return? However, the list of relevant circumstances in subsection 45B(8) is not exhaustive and regard may be had to other circumstances on the basis of their relevance. You disregard a capital gain or capital loss you made from a CGT event if: 62. The ATO ruling, if 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). ATO references: 49. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 2. 18. 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. 19. The Payment Date is anticipated to be in mid to late December 2014. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . ITAA 1997 977-50 ITAA 1997 104-135 No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. The converted shares will have the same date of acquisition as the original shares to which they relate. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people, An indirect Australian real property interest not covered by item 5, A CGT asset used at any time in carrying on a business through a permanent establishment in Australia and which is not covered by items 1, 2, or 5, An option or right to acquire a CGT asset covered by items 1, 2 or 3. 11. 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 Class 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 1997 104-135(4) 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: 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). a capital payment (it was not classed as a dividend for any purpose and had no dividend component). The Record Date for the return of capital is expected to bein late November or early December 2014. This is clearly marked. 73. Collectively, shareholders received a total distribution of approximately $2,268million. 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. 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. 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. TD 2000/10, Subject References: 59. 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 will be debited to Wesfarmers share capital account. 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. 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. There was no share consolidation in relation to the capital return. 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 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. Return of capital amount - $5.68 for each entitled WES share. Wesfarmers Chemicals, Energy and Fertilisers, People development, diversity and inclusion, Chairman and Managing Director's 2022 sustainability message, Bunnings collaborates with Indigenous artists through exclusive plant pots range, Bunnings support for flood affected communities, Bunnings launches national battery recycling programs, Bunnings expands fleet with all electric trucks, Information for participants of the Wesfarmers employee share plans. 82. Ruling Return of capital is not a dividend 7. ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. 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). according to an ATO ruling. 13. 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). 67. Each of these conditions is considered in this Ruling. 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. 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. 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). ITAA 1997 Div 112 58. The return of capital was considered and approved by shareholders at the 2021 AGM. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. 30. 9. Make sure you have the information for the right year before making decisions based on that information. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. Shares commence trading on an ex return of capital basis. Recording the capital gain on the tax return. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 13. 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. 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). 28. 43. The Commissioner will not make a determination under either 1. 23. Accordingly, the principal asset test in section 855-30 will not be satisfied. 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 was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. 78. ITAA 1997 975-300 ITAA 1936 45B(2)(b) return of capital on shares 50. Therefore, if the cost base or reduced cost base of the share previously owned by you has been fully applied in working out a capital gain or capital loss on the share, the right to receive the return of capital will have a nil cost base. any gain or loss you made on the shares is a capital gain or capital loss - this means that you held your shares as an investment asset. 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 Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 74. Shares may have traded at a lower price from the ex return of capital date than they otherwise would have done had the return of capital not occurred. Foreign-resident shareholders able to disregard capital gains tax. 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). For shares that had reached a taxing point (i.e. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. 21. As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. 42. 22. You calculate your capital gain using the: Indexed cost base or discount method, whichever gives you the better result*, On or after 21 September 1999 and before 15December 2002, Discount method (after applying any capital losses - including unapplied capital losses from previous years). ITAA 1997 855-15 The capital gain is equal to the amount of the excess. 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. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). Some of the information on this website applies to a specific financial year. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. 31. 8. 57. Non-resident shareholders should seek specific advice in relation to the tax consequences arising from the return of capital under the laws of their country of residence. Last date for trading in cum return of capital for shares. As a result, you will, in those circumstances, make a capital gain equal to the capital proceeds, being $2.00 per Wesfarmers share owned at the Record Date. Wesfarmers raised the following equity to reduce debt and provide balance sheet flexibility: 12. 66. 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. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. 35. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. Make sure you have the information for the right year before making decisions based on that information. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. ITAA 1997 104-135(3) Mark received a total of $500 (200 x $2.50) in the return of capital. 23. 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. 81. The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. ITAA 1936 45C ITAA 1936 45A(3)(b) ITAA 1936 45B(5)(b) 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). Record date for determining entitlement to participate in the return of capital. ITAA 1936 45C(2) This is a Tax Office ruling on the tax consequences arising from this return of capital. Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. 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. The following is a detailed contents list for this Ruling: 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). ITAA 1997 975-300(3) This represents a total return of approximately $579 million to Wesfarmers shareholders. 4:00pm (Perth time) Friday, 19 November 2021. 3. 34. 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. ITAA 1997 104-25 ITAA 1997 Div 109-A The following description of the scheme is based on information provided by the applicant. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). 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. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. 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). 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 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. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. The Commissioner will not make a determination under either The purpose which causes section 45B to apply may be the purpose of any party to the scheme. 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). 52. Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. 58. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). The amount of the capital gain is equal to that excess. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. 6. ITAA 1997 Div 112 Did I have the choice to participate in the capital return? 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. The capital return was completed on 18 December 2003. 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)). ITAA 1936 6(1) The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 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. 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). 30. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . The table sets out these five categories of CGT assets: 77. 80. ITAA 1997 104-25 Depending on the outcome, you may have to include some details on your 2003-04 tax return. 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