If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. 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. What will happen to the number of shares I hold? 72. 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. 9. Did I have the choice to participate in the capital return? Some of the information on this website applies to a specific financial year. The following is a detailed contents list for this Ruling: 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). 19. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. share capital, Legislative References: In particular: 26. Recording the capital gain on the tax return. 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. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. This Ruling applies from 1 July 2013 to 30 June 2014. 60. 25. CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 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 discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. 32. A capital benefit was provided to Wesfarmers' shareholders. Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. 22. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 5. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 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. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. 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. It states that a person is provided with a capital benefit if: 52. ITAA 1997 995-1(1) Other increases to share capital have been due to dividend reinvestment and employee incentives. The summary in these documents and in this section is general in nature and should not be relied upon as advice. The return of capital satisfies the first two conditions. 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. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. 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. 10. 71. Please find below some information and frequently asked questions in relation to the 2021capital return. ITAA 1997 Div 110 Copyright Act 1968 No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). 64. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. 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. Corporations Act 2001. Some of the information on this website applies to a specific financial year. 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. 54. The test of purpose is an objective one. 56. How can I calculate my return of capital payment and when will I receive this payment? The ATO has issued Class Ruling CR 2018/59 . (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. ITAA 1997 104-135(3) He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 32. 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. 25. 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. 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. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 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. Wesfarmers shareholders received a $1.00 per share cash distribution. Under the return of capital, all shareholders were treated in the same manner. Eligible shareholders received 1 COL share for each WES share owned. 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: Division 230 does not apply to individuals unless they have made an election for it to apply. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. ITAA 1997 Div 197 On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). For shares that had reached a taxing point (i.e. 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. 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. 73. 63. 53. The Commissioner will not make a determination under either Section 45B - schemes to provide capital benefits. 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. Make sure you have the information for the right year before making decisions based on that information. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. ITAA 1997 855-15 ITAA 1936 45C 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Income tax: Capital management distribution: Wesfarmers Limited . For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 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. 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. 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. 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? 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). 65. 9. 14. The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. 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 Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. ITAA 1997 Div 197 The return of capital was not eligible to participate in the DIP. 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. Wesfarmers Limited (WES) - Demerger . ITAA 1997 855-10(1) 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. Return of capital is not a dividend for income tax purposes. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. ITAA 1997 995-1(1) The capital loss is equal to the amount of the difference (subsection 104-25(3)). Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. This payment was: The table sets out these five categories of CGT assets: 77. 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. 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. 28. Specifically, the provision applies where: 48. The capital gain is equal to the amount of the excess. Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. 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 ). The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. 55. Each of these conditions is considered in this Ruling. ITAA 1997 104-25 Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). The return of capital was recorded as a debit to Wesfarmers untainted share capital account. 19. 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. Mark received a total of $500 (200 x $2.50) in the return of capital. ITAA 1936 45B(2)(c) 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. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. 29. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). 17. 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. 18. ITAA 1997 Div 109-A This is clearly marked. 3. 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