Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 35. 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. Make sure you have the information for the right year before making decisions based on that information. . Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. 13. Depending on the outcome, you may have to include some details on your 2003-04 tax return. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. Mark purchased 200 Wesfarmers shares in December 2000. ITAA 1936 45A ITAA 1936 45C Eligible shareholders received 1 COL share for each WES share owned. 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. 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). We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 49. 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 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. 62. 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 capital loss is equal to the amount of the difference (subsection 104-25(3)). 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. Make sure you have the information for the right year before making decisions based on that information. capital reductions What are the shareholder tax implications of the capital return? 81. TAA 1953 The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. 20. 18. ITAA 1997 Div 109-A If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. 61. 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. 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 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. ITAA 1936 45B(9) 22. 29. ITAA 1936 45B(2)(a) Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. 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. 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. The summary in these documents and in this section is general in nature and should not be relied upon as advice. 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. 60. 19. 1. ITAA 1997 855-10 52. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. ITAA 1936 44 Expand Company Description ATO Class Ruling - return of capital to shareholders StockBot 357,511 posts about a year ago WES released this announcement to the ASX on 8 December 2021, 17:19. 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. The return of capital will be debited to Wesfarmers share capital account. Taxation Administration Act 1953. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. 64. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. The capital return was completed on 18 December 2003. Wesfarmers operates a diverse business which covers home improvement, office supplies, department stores and an industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. Some of the information on this website applies to a specific financial year. 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. 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: 8. The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. Wesfarmers shareholders received a 200 cents per share cash distribution. The discount factor for resident individuals is one-half. The following description of the scheme is based on information provided by the applicant. There was no dividend component as part of this capital management initiative. The Wesfarmers Dividend Investment Plandid not apply to the return of capital 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. 4. 38. 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. TAA 1953 21. The following tables sets out what method you can use. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 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). The capital gain is equal to the amount of the excess. What are the key dates for the capital return? Commissioner of Taxation 14. 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). Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. Will my shares be worth less after the capital return? This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. How do I provide, update or check my bank account details? Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 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. 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). 71. It states that a person is provided with a capital benefit if: 52. 75. 16. 20. 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. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). ITAA 1936 45A(2) ITAA 1997 975-300 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). CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 65. However, having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme was entered into or carried out for a more than incidental purpose of enabling Wesfarmers shareholders to obtain a tax benefit. The capital return has been approved by the shareholders. Wesfarmers derived a net profit after tax of $1.335 billion from the disposal of the assets, which was paid to shareholders as special dividends in April 2019 and October 2020. 44. ITAA 1997 975-300 The table sets out these five categories of CGT assets: 77. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 56. The Commissioner will not make a determination under either All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. The Commissioner will not make a determination under either The ruling has determined that the funds will be distributed via a return of capital of 75c per share and a fully franked dividend of 25c. Collectively, shareholders received a total distribution of approximately $2,268million. The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. 45. 39. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. This is clearly marked. 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. 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. 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. ITAA 1997 Div 115 22. 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. 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. Wesfarmers has confirmed that its share capital account (as defined in section 975-300 of the ITAA 1997) is not tainted (within the meaning of Division 197 of the ITAA 1997). capital gains tax How can I calculate my return of capital payment and when will I receive this payment? dividend income Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. CGT events C1-C3 - end of a CGT asset Therefore, if the full cost base or reduced cost base of a Wesfarmers share has been previously applied in working out a capital gain or capital loss made when a CGT event happened to that share, the right to receive the return of capital is likely to have a nil cost base. 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. 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. Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 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). 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. CGT event G1 (section 104-135 of the ITAA 1997) happens when. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). ITAA 1936 45B(3) 6. The following description of the scheme is based on information provided by the applicant. 56. The return of capital was announ ITAA 1997 Div 197 64. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. 30. * 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. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. 59. By . Unless the amount of the distribution exceeds the cost base of the shares, there will only be a cost base reduction under CGT event G1 (section 104-135 of the ITAA 1997). 37. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). This will bring the total dividend for the year to $2.1 billion. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. 47. 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. Australian Taxation Office (ATO) Class Ruling . Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. 28. 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). Annual General Meeting, at which shareholders voted to approve the return of capital. Distributed by Public, unedited and unaltered, on 08 December 2021 06:41:05 UTC. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). 24. | August 8, 2022 A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). 2. ITAA 1997 104-165(3) A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 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 the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This is clearly marked. 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). 43. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Maria's capital gain is $200 ($2,500 - $2,300). 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). Taxation Administration Act 1953. 12. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. Accordingly, the principal asset test in section 855-30 will not be satisfied. Income tax: Capital management distribution: Wesfarmers Limited . The payment was entirely capital in nature with no dividend component. 67. Record date for determining entitlement to participate in the return of capital. 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. 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. 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. For shares that had reached a taxing point (i.e. The following is a detailed contents list for this Ruling: ITAA 1997 109-5 The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. 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)). If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. 34. 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)). ITAA 1997 104-135(4) 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. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. a CGT asset that is covered by subsection 104-165(3) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. This is due to the outflow of funds to shareholders. Foreign-resident shareholders able to disregard capital gains tax. 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. 41. This amount represents your capital proceeds. 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 converted shares will have the same date of acquisition as the original shares to which they relate. 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. 7. The capital return was $2.50 per share. ITAA 1997 855-10(1) What will happen to the number of shares I hold? Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 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