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. 31. 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. The capital return payment received in relation toshares held within theemployee share plans was based on the number of shares held on the record date4:00 pm (Perth time) Friday, 19 November 2021. 20. Taxation Administration Act 1953. 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). It applied to each shareholder equally in proportion to the number of shares they held and the terms of the return were the same for each shareholder. 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. 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. | August 8, 2022 The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? 28. 35. 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. By . The return of capital was recorded as a debit to Wesfarmers untainted share capital account. Section 45B - schemes to provide capital benefits. 71. 74. ITAA 1997 Div 110 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 item 1, 2 or 5; an option or right to acquire a CGT asset covered by item 1, 2 or 3, and. Since 2009, Wesfarmers has reported the following retained earnings: 17. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). The Record Date for the return of capital is expected to be on 15 November 2013. ITAA 1936 318 share capital, Legislative References: 59. 2. 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. In broad terms, section 45B of the ITAA 1936 applies where: 49. . This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . ITAA 1936 45A(2) 40. The Record Date for the return of capital is expected to bein late November or early 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. 9. Section 45B - scheme to provide capital benefits. 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. 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 capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. Return of capital is not a dividend for income tax purposes. 75. Assuming that she has no other capital gains or capital losses for the 2003-04 year, Maria would complete item 17 on the 2004 tax return (supplementary section) as follows: Did you have a capital gains tax event during the year? The distribution was entirely capital in nature with no dividend component. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. 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. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). It is anticipated that the share consolidation will have no effect on the value of each shareholder's shares relative to the total market value of Wesfarmers. a capital payment (it was not classed as a dividend for any purpose and had no dividend component). Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. How can I calculate my return of capital payment and when will I receive this payment? Income tax: Capital management distribution: Wesfarmers Limited . For shares that had reached a taxing point (i.e. 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. This is clearly marked. 60. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. This Ruling sets out the income tax consequences for shareholders of Wesfarmers Limited (Wesfarmers) who received the return of capital payment of $2.00 per ordinary share on 2 December 2021 (Payment Date). 2. However, paragraph (d) of the definition of dividend 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. Accordingly, CGT event G1 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. 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. Components of the capital return The capital return was $2.50 per share. 57. 8 December 2021. 32. Make sure you have the information for the right year before making decisions based on that information. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. 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. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. ITAA 1997 Div 115 44. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. The return of capital was announ The discount factor for resident individuals is one-half. 29. 20. 16. Therefore, Wesfarmers shareholders will obtain a tax benefit from the return of capital. 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. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. 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. 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). The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. This Ruling applies from 1 July 2013 to 30 June 2014. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 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. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. Maria's capital gain is $200 ($2,500 - $2,300). Taxation Administration Act 1953. ITAA 1936 45B(9) Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. Foreign-resident shareholders able to disregard capital gains tax. 53. ITAA 1997 855-10 25. ITAA 1936 45B(5) The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. Under with section 112-25 of the ITAA 1997, the consolidation of Wesfarmers shares will not result in a CGT event happening where the company converts its shares in accordance with section 254H of the Corporations Act. 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. Note: The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. There was no dividend component as part of this capital management initiative. The assets disposed of were Wesfarmers' interests in Wesfarmers Bengalla Pty Ltd, Wesfarmers Curragh Pty Ltd, Tyre & Auto Pty Ltd and Quadrant Energy Holdings Pty Ltd, as well as 10.1% of Wesfarmers' 15% shareholding in Coles Group Limited. 50. ITAA 1997 104-165(3) Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. 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 . work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). 73. 5. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 58. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 82. Where the original shares were acquired on or after 20 September 1985, subsection 112-25(4) of the ITAA 1997 provides that each element of the cost base and reduced cost base of the converted shares is the sum of the corresponding elements of each original share. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 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. Depending on the outcome, you may have to include some details on your 2003-04 tax return. If you provided your direct credit payment instructions by 4:00pm (Perth time) on Friday, 19November2021, the return of capital payment was made on Thursday, 2 December 2021 by direct credit to your financial institution if your registered address is in Australia, New Zealand or the UK. ITAA 1997 Div 197 Ruling Return of capital is not a dividend 7. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). ITAA 1936 45B(2)(a) Having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme is proposed to be entered into for a more than incidental purpose of enabling a taxpayer to obtain a tax benefit. 6. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. A capital benefit was provided to Wesfarmers' shareholders. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. TD 2000/10, Subject References: 3. 68. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. ITAA 1997 975-300 If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. The Payment Date is anticipated to be late November to early December 2013. 72. 69. You received $2.50 for each share that you held on the record date. 36. ITAA 1997 995-1(1) ITAA 1936 6(1) Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. There was no share consolidation in relation to the capital return. * 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. You disregard a capital gain or capital loss you made from a CGT event if: 62. 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. All registered shareholders on the record date received the capital return there was not an opportunity for these shareholders to 'opt out' of the capital return. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. ITAA 1936 45B(3)(b) Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 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. This is due to the outflow of funds to shareholders. 4. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). ITAA 1936 45B(3) Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. 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. 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. The capital gain is equal to the amount of the excess. 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. 14. 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 1936 45B(5)(b) All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Accordingly, the Commissioner will not make a determination under subsection 45A(2) 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. 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'. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). 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 . The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. 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. 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. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 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. Commissioner of Taxation The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 47. If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. Collectively, shareholders received a total distribution of approximately $2,268million. 21. 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). Eligible shareholders received 1 COL share for each WES share owned. 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. 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 Div 197 The ruling applies from 1 July 2021 to 30 June 2022. . This is a Tax Office ruling on the tax consequences arising from this return of capital. 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. 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 return of capital was considered and approved by shareholders at the 2021 AGM. It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. ITAA 1936 45A 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). ITAA 1997 104-135(4) Wesfarmers' return of capital will be recorded as a debit to the share capital account and Wesfarmers shareholders will receive a distribution of share capital to the value of $0.50 per share. 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. Corporations Act 2001 256C. 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. Specifically, the provision applies where: 48. ITAA 1936 45B(8) Some of the information on this website applies to a specific financial year. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. 13. 5. 29. The return of capital was not eligible to participate in the DIP. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. For the purposes of paragraph 45B(2)(c), the Commissioner is required to consider the 'relevant circumstances' set out in subsection 45B(8) to determine whether any part of the scheme would be entered into for a purpose, other than an incidental purpose, of enabling a relevant taxpayer to obtain a tax benefit. 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. capital gains tax Some of the information on this website applies to a specific financial year. She must use the indexed cost base method in all future events affecting these shares. Wesfarmers has advised that, at the time CGT event G1 happens for any foreign resident Wesfarmers shareholder who is entitled to the return of capital, a Wesfarmers share will not be an indirect Australian real property interest (as defined in section 855-25 of the ITAA 1997). 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 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. The Commissioner will not make a determination under either 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. 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. 56. 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. 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 Commissioner makes this Ruling based on the precise scheme identified in this Ruling. ITAA 1997 855-15 The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. 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. Using this method, Maria has made no capital gain on the return of capital, so she does not have to put anything on her 2003-04 tax return to reflect this event. 80. ITAA 1936 45B ITAA 1997 855-30 ITAA 1936 47 For your other shares - reduce the cost base and reduced cost base by $2.50 each. The Class This is clearly marked. Our diverse business operations cover: home improvement and outdoor living; apparel and general merchandise; office supplies;health, beauty and wellbeing; and an Industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. 55. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. Wesfarmers' retained earnings (on a stand-alone basis) for the year ended 30 June 2021 was $697 million post-payment of the final dividend for the year. The ATO ruling, if Corporations Act 2001 256B As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. Did the Dividend Investment Plan (DIP) apply? Wesfarmers anticipates that it will pay a fully franked dividend of approximately $1.2 billion ($1.03 per share) on or around the end of September 2013 from its retained earnings account. 15. 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. 64. ITAA 1997 975-300 ITAA 1936 45A(2) 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. 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Australian real property interest ' as defined in subsection 45B ( 5 ) you. Indexed cost base method in all future events affecting the cost base method in all future events these! 197 ) my Wesfarmers shares Some of the capital return was $ 15.818 billion References: 59 2013 to June. Received 1 COL share for each share that you held on the tax implications for each $! The categories of CGT assets that are proportionately higher priced 2001 256B as at 30 June 2014 consolidation, '. Is equal to the outflow of funds to shareholders in substitution for dividends Ruling confirms that will! Section 975-300 ) is not tainted ( within the meaning of Division 197 ) return. Accordance with section 254H of the information contained therein outstanding Loan balance participated. No share consolidation in relation to the capital return standing to the outflow of funds to shareholders the. As defined in subsection 45B ( 3 ) Sections 45A, 45B and 45C of the.... Receive this payment approved by shareholders at the AGM scheduled for 7 November 2013 for!: 27 accordance with section 254H of the capital return the Record Date for purpose. Capital is expected to be on 15 August 2013 with Wesfarmers returning to shareholder.
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