ITAA 1936 45A(3)(b) 37. 46. 59. 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. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. 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. Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. If the return of capital is approved by shareholders at the 2013 . ITAA 1936 45B 10. ITAA 1936 45B(2)(b) 14. 20. ITAA 1936 45B(8) For your other shares - reduce the cost base and reduced cost base by $2.50 each. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 37. For participants in the Australian tax exempt share plans or the loan plans the cost base for each share held on behalf of employees should be reduced by the return of capital amount. ITAA 1997 Div 115 Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). 25. 6. ITAA 1997 855-15 Wesfarmers provided separate information in relation to the tax implications of the return of capital payment for participants who were located within Hong Kong and India at the time of the capital return payment. ITAA 1936 47 32. How do I provide, update or check my bank account details? Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. 31. 4. ITAA 1936 45A(2) 9. 22. 21. 30. 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). ITAA 1936 45B(3) If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. 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. This is clearly marked. 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'. 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. 1. ITAA 1997 104-135(4) 15. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). 42. 54. The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. 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 following description of the scheme is based on information provided by the applicant. How did the capital return work and what was the effect on the company? sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. Since 2009, Wesfarmers has reported the following retained earnings: 17. 42. 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. 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. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 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. 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. Without the capital return or some other capital management initiative, we estimate that the ratio would be around 44 per cent at the end of the current financial year." Mr Chaney said the tax office had provided a written draft class ruling at the end of last week, enabling the Board to consider the issue at today's meeting. You have made a capital gain if your cost base per share on the record date (15December 2003) was less than the amount you received for each share ($2.50). The return of capital was recorded as a debit to Wesfarmers untainted share capital account. 31. For more information on how to work out the cost base and the reduced cost base of shares, see the Guide to capital gains tax. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. ATO references: 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. 39. 2. Some of the information on this website applies to a specific financial year. NO 1-4UM8A44, Related Rulings/Determinations: 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. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 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. 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). A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . : Yes. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. This is clearly marked. You received $2.50 for each share that you held on the record date. 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. 54. Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 74. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. 21. 36. Section 45A - streaming of dividends and capital benefits. ITAA 1997 977-50 Record date for determining entitlement to participate in the return of capital. 25. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . CGT events G1-G3 - shares 13. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). ITAA 1997 104-135 Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 55. The amount of the capital gain is equal to that excess. 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)). As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. Wesfarmers Limited was founded in 1914 and is headquartered in Perth, Australia. 35. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 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). 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. 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: For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital. 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. 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)). Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. ATO Class Ruling - return of capital to shareholders. Will my shares be worth less after the capital return? share capital, Legislative References: 59. 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. 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. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. 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). 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. Specifically, the provision applies where: 48. . This is due to the outflow of funds to shareholders. This amount represents your capital proceeds. 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. The test of purpose is an objective one. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. The term 'dividend' is defined in subsection 6(1) of the ITAA 1936 and includes any distribution made by a company to any of its shareholders. 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. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. ITAA 1997 995-1(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. ITAA 1997 Div 112 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. 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. 43. ITAA 1997 104-135(3) The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 63. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 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