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). This is clearly marked. 72. ITAA 1997 995-1(1) This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. 76. 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. dividend income No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. The Record Date for the return of capital is expected to be on 15 November 2013. 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. 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. TAA 1953 35. 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. 49. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. ITAA 1997 104-25(3) AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. ITAA 1997 855-10(1) 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. 42. The return of capital was announced on 27 August 2021 and was approved by shareholders at the Wesfarmers Annual General Meeting on 21 October 2021. It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. 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). ITAA 1936 45C ITAA 1936 45C(1) Return of Capital Wesfarmers proposes to make a cash payment to shareholders of A$0.50 per ordinary share and partially protected share as a return of capital. For shares that had reached a taxing point (i.e. The capital gain is equal to the amount of the excess. 13. 16. 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. 7. 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. 30. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. The capital return distribution was paid on Thursday, 2 December 2021. ITAA 1997 104-135 47. 4 September 2013. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. ITAA 1997 104-135 41. 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). The return of capital was announ This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 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. 'Share capital account' is defined in section 975-300 of the ITAA 1997 as an account which the company keeps of its share capital, or any other account created after 1 July 1998 where the first amount credited to the account was an amount of share capital. It is anticipated that shareholder approval will be sought at the AGM 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 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. 5. The converted shares will have the same date of acquisition as the original shares to which they relate. 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? Accordingly, the Commissioner will not make a determination under subsection 45B(3) 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. Shares commence trading on an ex return of capital basis. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. 40. Mark purchased 200 Wesfarmers shares in December 2000. Make sure you have the information for the right year before making decisions based on that information. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. ITAA 1936 45B ITAA 1997 115-25(1) Since 2009, the dividend payout of Wesfarmers has been as follows: 14. 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. 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). The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. This will bring the total dividend for the year to $2.1 billion. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. 79. 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. ITAA 1997 104-135(4) It states that a person is provided with a capital benefit if: 52. 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: 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). ITAA 1997 115-25(1) You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. 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. 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. ITAA 1936 45A(3)(b) 2. How can I calculate my return of capital payment and when will I receive this payment? The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. If the return of capital of $2.00 per Wesfarmers share you received was not more than the cost base of the share, the Cost base / reduced cost base of each share is reduced by the amount of the return of capital (subsection 104-135(4)). Make sure you have the information for the right year before making decisions based on that information. 38. 14. ITAA 1997 104-135(3) This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. ITAA 1997 104-165(3) ITAA 1997 116-20(1) 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)). The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 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). The return of capital was an equal reduction of capital under section 256B of the Corporations Act 2001 and required shareholder approval by ordinary resolution under section 256C of the Corporations Act 2001. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. 19. 2. You made a capital gain when CGT event G1 happened if the return of capital of $2.00 per Wesfarmers share you received was more than the share's cost base (subsection 104-135(3)). . The payment was entirely capital in nature with no dividend component. return of capital on shares 8. Accordingly, section 45A has no application to the return of capital. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. Accordingly, if the Wesfarmers share was acquired by the Wesfarmers shareholder at least 12 months before the return of capital was paid, a capital gain from CGT event C2 happening on the ending of the corresponding right 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. 3. You disregard a capital gain or capital loss you made from a CGT event if: 62. 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. 58. 59. 33. 6. Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. The ruling applies from 1 July 2021 to 30 June 2022. There was no share consolidation in relation to the capital return. Corporations Act 2001. Subsection 44(1) includes in a shareholder's assessable income any dividends, as defined in subsection 6(1), paid to the shareholder out of profits derived by the company from any source (if the shareholder is a resident of Australia) and from an Australian source (if the shareholder is a non-resident of Australia). 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). 1. 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 capital return has been approved by the shareholders. 9. share capital, Legislative References: She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. ITAA 1997 Div 110 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. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 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. adjust the cost base and reduced cost base of your Wesfarmers shares. 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. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. Since 2009, Wesfarmers has reported the following retained earnings: 17. You received $2.50 for each share that you held on the record date. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 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 ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. The ATO ruling, if Section 45A - streaming of dividends and capital benefits. 42. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. How much did I receive and how was the payment made? 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. ITAA 1997 109-5 The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. 62. The capital return was $2.50 per share. 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 indexed cost base is $3,555.80 ($2,300 x 1.546). 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. 69. Collectively, shareholders received a total distribution of approximately $1,143 million. 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. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. ITAA 1936 45B(3)(b) ITAA 1936 45B(2)(a) Commissioner of Taxation Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). CGT event G1 (section 104-135 of the ITAA 1997) happens when. 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. ITAA 1997 855-30 ITAA 1936 45B ato class ruling wesfarmers return of capital. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. Record date for determining entitlement to participate in the return of capital. This is clearly marked. 57. 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. The following tables sets out what method you can use. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 80. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. 67. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). ITAA 1997 977-50 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. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. 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. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. 66. 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