Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. 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 45B(3) 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. 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. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. ITAA 1997 855-15 61. Section 45A - streaming of dividends and capital benefits. 47. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. Since 2009, Wesfarmers has reported the following retained earnings: 17. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. Who this Ruling applies to 4. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. A CGT asset that is covered by subsection 104-165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident). TAA 1953 ITAA 1997 116-20(1) Copyright Act 1968 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. The Class Ruling and further details regarding the return of capital can be accessed via the Investor Centre section of the Wesfarmers website at www.wesfarmers.com.au. What are the capital gains tax consequences for me? 35. 22. . The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. Mark purchased 200 Wesfarmers shares in December 2000. The only relevant category of taxable Australian property is table item 2 of section 855-15. She must use the indexed cost base method in all future events affecting these shares. The Payment Date is anticipated to be late November to early December 2013. ITAA 1936 45B Please find below some information and frequently asked questions in relation to the 2021capital return. 63. In broad terms, section 45B of the ITAA 1936 applies where: 49. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 16. 65. It states that a person is provided with a capital benefit if: 52. 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. Demerger tax relief gives certain Wesfarmers shareholders the choice to defer the Australian capital gains tax (CGT) consequences that arise as a result of a Wesfarmers shareholder receiving Coles shares under the demerger. 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 cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). ITAA 1997 104-135(3) 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). 79. Make sure you have the information for the right year before making decisions based on that information. This is clearly marked. Maria's capital gain is $200 ($2,500 - $2,300). A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. ITAA 1997 Div 112 Bunnings Limited shareholders offered $11.20 for each Bunnings share or $25.80 plus 2 Wesfarmers shares plus 1 Wesfarmers option ($12.50) for every 4 Bunnings shares 6 Nov 1989 Renounceable rights offer - 1 for 7 at a price of $4.25 per share 13 Jan 1989 Share split - each $1.00 share split into 2 x 50 cent shares 22 Apr 1987 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. Will my shares be worth less after the capital return? Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited, Personal investors guide to capital gains tax, Aboriginal and Torres Strait Islander people, you are an Australian resident for tax purposes, you held shares in Wesfarmers and received the return of capital in December2003, you did not acquire your shares under an employee share scheme, and. 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)). In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. ITAA 1997 104-25(3) Return of capital is not a dividend for income tax purposes. 18. 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. Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. 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. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. 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. 8 December 2021. 49. 55. The term 'share capital account' is defined in section 975-300 as an account which the company keeps of its share capital, or any other account created on or after 1 July 1998 where the first amount credited to the account was an amount of share capital. 46. CGT event C2 happened when the return of capital was made. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 17. 61. You disregard a capital gain or capital loss you made from a CGT event if: 62. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. 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. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). The high dividend payout policy is intended to be maintained following the return of capital to shareholders. Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 25. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. 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 relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. The purpose which causes section 45B to apply may be the purpose of any party to the scheme. 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. a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 10. The Payment Date is anticipated to be in mid to late December 2014. 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. If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. The Commissioner will not make a determination under either subsection 45A(2) of the ITAA 1936 or paragraph 45B(3)(b) of the ITAA 1936 that section 45C of the ITAA 1936 applies to any part of the return of capital of $2.00 per Wesfarmers share you received on the Payment Date. ITAA 1997 115-25(1) Income tax: Capital management distribution: Wesfarmers Limited . work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). ITAA 1997 Div 197 This is due to the outflow of funds to shareholders. 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). NO 1-PVCWOSF, Legislative References: ITAA 1997 Div 110 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. 50. 40. ITAA 1997 104-25 19. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 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. CGT event G1 (section 104-135 of the ITAA 1997) happens when. 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. 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). The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. 25. 28. 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). AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 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. 11. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. '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. Payments made to credit unions may take longer. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). 41. . 4. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. ITAA 1936 6(1) 9. 67. 34. TAA 1953 5. 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). The summary in these documents and in this section is general in nature and should not be relied upon as advice. 51. This Ruling applies from 1 July 2021 to 30 June 2022. This is clearly marked. 3. ATO Class Ruling - return of capital to shareholders. ITAA 1997 Div 197 37. 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). 19. return of capital on shares A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. ITAA 1936 45A As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. 13. Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. ITAA 1997 995-1(1) Wesfarmers Limited (WES) - Demerger . 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. adjust the cost base and reduced cost base of your Wesfarmers shares. 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). The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. ITAA 1936 45C Section 45A of the ITAA 1936 generally applies where: 45. 30. The ATO has issued Class Ruling CR 2018/59 . ITAA 1997 975-300 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. 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. What are the key dates for the capital return? Section 45A - streaming of dividends and capital benefits. 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. . After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. What will happen to the number of shares I hold? 78. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. The return of capital was considered and approved by shareholders at the 2021 AGM. The Class 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). 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. If the return of capital is approved by shareholders at the 2013 . 15. 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. 42. How much did I receive and how was the payment made? ITAA 1936 45B(3) The table sets out these five categories of CGT assets: 77. 21. Each of these conditions is considered in this Ruling. 6. ITAA 1936 45B(9) Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 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. Wesfarmers raised the following equity to reduce debt and provide balance sheet flexibility: 12. share capital, Legislative References: Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. Commissioner of Taxation Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. 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. 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). Shareholders who did not provide the share registry with their bank account details, may complete a paper Direct Credit Payment Form, which is available from Wesfarmers share registry, Computershare Investor Services Pty Limited, or provide their details online to Computershare at www.computershare.com.au/easyupdate/wes. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 39. 56. Eligible shareholders received 1 COL share for each WES share owned. 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). 22. 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. The return of capital will be paid equally to each holder of a Wesfarmers share who is registered on the Wesfarmers share register on the Record Date. 9. 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. Create your myGov account and link it to the ATO, Help and support to lodge your tax return, Occupation and industry specific income and work-related expenses, Residential rental properties and holiday homes, Instalment notices for GST and PAYG instalments, Your obligations to workers and independent contractors, Encouraging NFP participation in the tax system, Australian Charities and Not-for-profits Commission, Departing Australia Superannuation Payment, Small Business Superannuation Clearing House, Annual report and other reporting to Parliament, Complying with procurement policy and legislation, Wesfarmers Group Limited (Wesfarmers) return of capital. capital gains tax ITAA 1997 104-25(3) ITAA 1936 318 CGT events G1-G3 - shares How can I calculate my return of capital payment and when will I receive this payment? The ruling applies from 1 July 2021 to 30 June 2022. 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. 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. 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. Note: 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. ITAA 1936 45B The return of capital satisfies the first two conditions. Wesfarmers shareholders received a $1.00 per share cash distribution. ITAA 1997 104-25 There was no share consolidation in relation to the capital return. 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. 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. Ruling Return of capital is not a dividend 7. By . 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. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. ITAA 1997 855-10 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 . The discount factor for resident individuals is one-half. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. Shareholders are sent return of capital payment advice. ITAA 1936 45A(3)(b) 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. ITAA 1936 45B(2)(b) ITAA 1997 Div 110 The return of capital will be paid equally to each holder of a Wesfarmers share (being ordinary shares and partially protected ordinary shares) who is registered on the Wesfarmers share register on the Record Date. 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)). Australian Taxation Office (ATO) Class Ruling . 5. ITAA 1936 45A 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 expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. 33. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). 25. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . For shares that had reached a taxing point (i.e. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 13. 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. 59. 60. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. Section 45B - scheme to provide capital benefits. The payment was entirely capital in nature with no dividend component. 39. 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. 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). : Yes. Record date for determining entitlement to participate in the return of capital. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 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. 29. 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