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. 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 ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 70. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. . ITAA 1997 104-25(3) 26. Will my shares be worth less after the capital return? If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. It states that a person is provided with a capital benefit if: 52. ITAA 1997 975-300 73. 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). If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. ITAA 1936 45A(3)(b) 45. ITAA 1997 855-10(1) In particular: 26. ITAA 1997 975-300(3) ITAA 1936 45B(9) 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). The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. 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. Ruling Return of capital is not a dividend 7. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. 8 December 2021. 35. ITAA 1997 Div 197 Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. 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. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 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. CGT event G1 (section 104-135 of the ITAA 1997) happens when. A capital benefit was provided to Wesfarmers' shareholders. TAA 1953 52. 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. 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. Sections 45A and 45B are anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C applies to treat all or part of the return of capital to be received by Wesfarmers shareholders as an unfranked dividend. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. 20. 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. The return of capital was considered and approved by shareholders at the 2021 AGM. 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. Wesfarmers Limited (WES) - Demerger . ITAA 1936 45A(2) ITAA 1997 104-25 Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. ITAA 1936 45C 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. There was no dividend component as part of this capital management initiative. 12. How did the capital return work and what was the effect on the company? 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. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. 57. 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). It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 82. ITAA 1997 104-135(3) You will make a capital loss if the capital proceeds from the ending of the right are less than the reduced cost base of the right. The uplift factor is worked out by dividing 123.4 by the consumer price index for the December quarter of 1986 (79.8) and is 1.546 (rounded to three decimal places). The amount of the capital gain is equal to that excess. ITAA 1997 Div 112 ITAA 1997 855-30 81. 55. Section 45B - schemes to provide capital benefits. 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 return of capital was an equal reduction of capital under section 256B of the Corporations Act 2001 and required shareholder approval by ordinary resolution under section 256C of the Corporations Act 2001. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. 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. 35. 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. Section 45B - scheme to provide capital benefits. 37. ITAA 1997 Div 197 ITAA 1936 45B(3) 5. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. ITAA 1936 45A(2) 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. A Wesfarmers shareholder will make a capital loss if the capital proceeds from the ending of the right are less than the reduced cost base of the right. 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 . The capital return was completed on 18December 2003. 62. However, the list of relevant circumstances in subsection 45B(8) is not exhaustive and regard may be had to other circumstances on the basis of their relevance. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. Shares may have traded at a lower price from the ex return of capital date than they otherwise would have done had the return of capital not occurred. 3. As a result, you will, in those circumstances, make a capital gain equal to the capital proceeds, being $2.00 per Wesfarmers share owned at the Record Date. 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? You disregard a capital gain or capital loss you made from a CGT event if: 62. 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. Copyright Act 1968 AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. Wesfarmers shareholders received a $1.00 per share cash distribution. 22. NO 1-4UM8A44, Related Rulings/Determinations: Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. If the Wesfarmers share to which the return of capital relates was acquired by a Wesfarmers shareholder at least 12 months before the payment, a capital gain from CGT event G1 happening 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. 79. adjust the cost base and reduced cost base of your Wesfarmers shares. 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. This represents a total return of approximately $579 million to Wesfarmers shareholders. The capital return has been approved by the shareholders. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. Who this Ruling applies to 4. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. ITAA 1997 104-135(3) The capital gain will be a discounted capital gain for shares allocated at least 12 months before the payment date of Thursday, 2 December 2021. At Wesfarmers we believe sustainability is about understanding and managing the ways we impact the communities and environments in which we operate, to ensure that we continue to create value in the future. they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Specifically, the provision applies where: 48. Corporations Act 2001 256B Make sure you have the information for the right year before making decisions based on that information. This amount represents your capital proceeds. 50. 11. 16. 59. If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. The payment was entirely capital in nature with no dividend component. 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. The following description of the scheme is based on information provided by the applicant. 29. . ITAA 1997 Subdiv 115-A In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. The converted shares will have the same date of acquisition as the original shares to which they relate. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . 2. 22. 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. ITAA 1997 Div 115 Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. 64. The only relevant category of taxable Australian property is table item 2 of section 855-15. ITAA 1997 975-300(3) Collectively, shareholders received a total distribution of approximately $2,268million. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. For those employee shareholders who hold their shares within a New Zealand Wesfarmers employee share plan, are tax residents of New Zealand and only work in New Zealand, it is expected the return of capital payment will be treated as dividend income. 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. A maximum of approximately 9.57% of Wesfarmers shares are pre-CGT assets. ITAA 1997 995-1(1) There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. Recording the capital gain on the tax return. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. 15. ITAA 1997 104-25(3) Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 18. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. 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). For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. 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. ITAA 1997 115-25(1) 24. 25. 'Share capital account' is defined in section 975-300 of the ITAA 1997 as an account which the company keeps of its share capital, or any other account created after 1 July 1998 where the first amount credited to the account was an amount of share capital. ITAA 1936 45B(3) Shareholders are sent return of capital payment advice. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. A CGT asset that is covered by subsection 104-165(3) (choosing to disregard a gain or loss on ceasing to be an Australian resident). ITAA 1997 855-20 59. 60. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. 6. 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. according to an ATO ruling. What will happen to the number of shares I hold? 48. 1. Did I have the choice to participate in the capital return? 2. Wesfarmers has consistently maintained a high dividend payout ratio, with an average payout ratio of approximately 90% since 2009, and has also paid special dividends where it has disposed of assets. CGT event C2 happened when the return of capital was made. Payments made to credit unions may take longer. 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). . The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. 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. Corporations Act 2001. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. 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. 19September 1985 has increased from $ 2.2 billion in June 2012 - demerger of Group. Section 855-15 will be debited against an amount standing to the Wesfarmers shareholders received total. 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