9. 42. The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. Foreign-resident shareholders able to disregard capital gains tax. 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 110 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: 40. ATO references: Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. ITAA 1997 977-50 The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 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). CGT event C2 happened to your right to receive the return of capital on the Payment Date when Wesfarmers paid you a return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and ceased to own before the Payment Date (section 104-25). 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). Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. 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. 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). The high dividend payout policy is intended to be maintained following the return of capital to shareholders. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 65. ITAA 1936 45B(2)(c) 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). ITAA 1936 45B 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. ITAA 1997 115-25(1) By contrast, a dividend would generally be included in the assessable income of a resident shareholder or in the case of a foreign resident, be subject to dividend withholding tax under section 128B. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. 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. 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. 40. 2. ITAA 1997 855-10(1) ITAA 1936 45A 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. This is due to the outflow of funds to shareholders. 58. 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). 9. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 19. 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. 5. The payment was entirely capital in nature with no dividend component. The following is a detailed contents list for this Ruling: 12. 33. capital reductions 46. How can I calculate my return of capital payment and when will I receive this payment? Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. ITAA 1997 855-30 ITAA 1936 45B(9) ITAA 1936 44 The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. 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. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. 18. 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. 61. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share. 2. The summary in these documents and in this section is general in nature and should not be relied upon as advice. For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. There was no dividend component as part of this capital management initiative. This Ruling applies from 1 July 2021 to 30 June 2022. 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. 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. ITAA 1997 Div 115 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. 10. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 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 a Wesfarmers shareholder's right to receive the return of capital is worked out under Division 110 of the ITAA 1997 (modified by Division 112 of the ITAA 1997). according to an ATO ruling. There was no share consolidation in relation to the capital return. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. It states that a person is provided with a capital benefit if: 52. 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. This will bring the total dividend for the year to $2.1 billion. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. 19. 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. The capital return was completed on 18 December 2003. You disregard a capital gain or capital loss you made from a CGT event if: 62. 4. 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. 59. This payment was: Ruling Return of capital is not a dividend 7. Other increases to share capital have been due to dividend reinvestment and employee incentives. If Maria chooses the discount method, she calculates her capital gain by subtracting her cost base from the amount she received in the return of capital. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. The share consolidation will occur after the return of capital to Wesfarmers shareholders, and will be applied to both the fully paid ordinary shares and the partially protected ordinary shares. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 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 capital loss is equal to the amount of the difference (subsection 104-25(3) of the ITAA 1997). 74. 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. The amount of the capital gain is equal to that excess. 15. 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. 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. 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. CGT event G1 (section 104-135 of the ITAA 1997) happens when. Ruling Return of capital is not a dividend 7. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. How much did I receive and how was the payment made? 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. 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. 17. ITAA 1997 116-20(1) The Payment Date is anticipated to be late November to early December 2013. 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. 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. 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. Wesfarmers shareholders received a $1.00 per share cash distribution. 34. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. 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. 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. 6. 54. Wesfarmers credited $12,733 million to its share capital account on the issue of Wesfarmers ordinary shares and partially protected ordinary shares to Coles Group shareholders in part payment for the acquisition of all the issued shares in Coles Group. Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. 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). 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? 6. 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 test of purpose is an objective one. 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. 39. Last date for trading in cum return of capital for shares. The right to receive the return of capital, being an intangible asset, ended by the right being discharged or satisfied when the return of capital was made (section 104-25). Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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). TR 2006/10 34. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . In particular: 26. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. Since 2009, Wesfarmers has reported the following retained earnings: 17. Collectively, shareholders received a total distribution of approximately $2,268million. A capital benefit was provided to Wesfarmers' shareholders. CGT event C2 happened when the return of capital was made. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). What are the capital gains tax consequences for me? 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. 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. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. 14. 21. 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)). ITAA 1936 45B(2)(b) ITAA 1997 104-25 ITAA 1997 855-15 20. 32. ATO Class Ruling - return of capital to shareholders. 62. 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. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. Section 45B - schemes to provide capital benefits. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). 2. 60. Return of capital is not a dividend for income tax purposes. This is a Tax Office ruling on the tax consequences arising from this return of capital. ITAA 1997 104-25(3) 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'. Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). 63. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 41. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. Who this Ruling applies to 4. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. Note: Section 45A applies in circumstances where capital benefits are streamed to certain shareholders (the advantaged shareholders) who derive a greater benefit from the receipt of capital and it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received or will receive dividends. Section 45A of the ITAA 1936 generally applies where: 45. 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. ITAA 1936 6(1) We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 32. ITAA 1936 45C(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 . On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. The return of capital satisfies the first two conditions. 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). Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. Income tax: Capital management distribution: Wesfarmers Limited . 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. 1. ITAA 1997 995-1(1) Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 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. 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. ITAA 1936 45A 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. return of capital on shares Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. 1. 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). 3. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. 56. 82. Eligible shareholders received 1 COL share for each WES share owned. Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. 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