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. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. ITAA 1997 104-25(3) 74. 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). 73. ITAA 1936 45B(2)(c) Australian Taxation Office (ATO) Class Ruling . ITAA 1936 47 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 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. ITAA 1997 855-10 There was no dividend component as part of this capital management initiative. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. ITAA 1936 45B(9) Taxation Administration Act 1953. 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. 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. The only relevant category of taxable Australian property is table item 2 of section 855-15. CGT events G1-G3 - shares : Yes. 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). Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. 13. Make sure you have the information for the right year before making decisions based on that information. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 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. 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. Taxation Administration Act 1953. 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. 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)). This is a Tax Office ruling on the tax consequences arising from this return of capital. Income tax: Capital management distribution: Wesfarmers Limited . ITAA 1997 855-10 ITAA 1936 6(1) ITAA 1997 855-20 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. For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. 15. ITAA 1936 45B(3) ITAA 1997 104-165(3) 5. During the years ended 30 June 2018 to 30 June 2020, Wesfarmers disposed of a number of assets and received sale proceeds totalling $4.3 billion. Maria's capital gain is $200 ($2,500 - $2,300). 2. 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. return of capital on shares 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. Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. ITAA 1936 45C(2) 44. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. 38. Each of these conditions is considered in this Ruling. * 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. Corporations Act 2001. The principal asset test is passed in the case of shares in a company if the sum of the market values of the company's assets that are taxable Australian real property exceed the sum of the market values of the company's other assets. ITAA 1936 45A(2) 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)). All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 75. 9. 70. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 32. ITAA 1936 44(1) ITAA 1936 47 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 class ruling wesfarmers return of capital. The summary in these documents and in this section is general in nature and should not be relied upon as advice. Accordingly, the principal asset test in section 855-30 will not be satisfied. ITAA 1997 Div 110 ITAA 1997 115-25(1) The capital return was completed on 18December 2003. 11. 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. 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 104-25(3) 61. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 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. 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. Foreign-resident shareholders able to disregard capital gains tax. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. 63. 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. Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). 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'. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. CGT event C2 in section 104-25 of the ITAA 1997 will happen when Wesfarmers pays the return of capital to a Wesfarmers shareholder in respect of a Wesfarmers share that they own at the Record Date but which they cease to own before the Payment Date. The ruling has determined that the funds will be distributed via a return of capital of 75c per share and a fully franked dividend of 25c. Division 230 does not apply to individuals unless they have made an election for it to apply. The return of capital will be affected by way of an equal reduction of capital under section 256B of the Corporations Act 2001 (Corporations Act), and requires shareholder approval by ordinary resolution under section 256C of the Corporations Act. The 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. 53. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? ITAA 1997 Div 110 How much did I receive and how was the payment made? Since 2009, Wesfarmers has reported the following retained earnings: 17. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. Shares commence trading on an ex return of capital basis. 25. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. There was no share consolidation in relation to the capital return. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). 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. Recording the capital gain on the tax return. The discount factor for resident individuals is one-half. 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. Ruling Return of capital is not a dividend 7. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. share capital, Legislative References: In broad terms, section 45B of the ITAA 1936 applies where: 49. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. 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 Ruling applies from 1 July 2021 to 30 June 2022. CGT event C2 happened when the return of capital was made. a CGT asset that is covered by subsection 104-165(3) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). 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. The ruling applies from 1 July 2021 to 30 June 2022. ITAA 1936 45B(2)(b) This is clearly marked. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. 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. Mark received a total of $500 (200 x $2.50) in the return of capital. 41. 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. Wesfarmers has confirmed that its share capital account (as defined in section 975-300 of the ITAA 1997) is not tainted (within the meaning of Division 197 of the ITAA 1997). ITAA 1936 45B(3) 10. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. ITAA 1997 Div 197 What are the shareholder tax implications of the capital return? 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). Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. ITAA 1936 45C This represents a total return of approximately $579 million to Wesfarmers shareholders. Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 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. 30. to make a short-term or 'one-off' commercial gain. 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). How did the capital return work and what was the effect on the company? A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. ITAA 1936 45B(8) Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . 34. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. ITAA 1936 45C Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 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. 12. 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. 60. The Payment Date is anticipated to be late November to early December 2013. 21. 8. 49. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). The capital return was completed on 18 December 2003. 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 . 6. The capital gain is equal to the amount of the excess. By contrast, a dividend would generally be included in the assessable income of a resident shareholder or in the case of a foreign resident, be subject to dividend withholding tax under section 128B. 59. Mark purchased 200 Wesfarmers shares in December 2000. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. ATO Class Ruling - return of capital to shareholders. The cost base of the right does not include the cost base or reduced cost base of the share previously owned by you to the extent that it was applied in working out a capital gain or capital loss made when a CGT event happened to the share; for example, when you disposed of the share after the Record Date and before the Payment Date. 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. Corporations Act 2001 256B Under the return of capital, all shareholders were treated in the same manner. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). 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