ITAA 1936 45A(2) 47. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. ITAA 1997 977-50 As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. 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). As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. 75. 10. Corporations Act 2001. CGT events C1-C3 - end of a CGT asset This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 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. If you have a New Zealand bank account, the exchange rate that was used to convert the Australian dollar payment into New Zealand dollars was set on the record date. 67. 11. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). 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. 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 following is a detailed contents list for this Ruling: Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 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. 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. NO 1-4UM8A44, Related Rulings/Determinations: 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. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. 61. 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. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 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. 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(3) 14. 54. 30. 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 retained earnings as a proportion of total equity has significantly reduced over the period from the 2005 financial year (16%) to the 2013 financial year (4%), due to the significant amount of share capital that had been raised. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. Section 45A - streaming of dividends and capital benefits. Make sure you have the information for the right year before making decisions based on that information. 10. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. 72. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. share capital, Legislative References: ITAA 1997 104-135(4) 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). ITAA 1936 6(1) according to an ATO ruling. ITAA 1936 45A Did the Dividend Investment Plan (DIP) apply? This payment was: If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. The term 'share capital account' is defined in section 975-300 as an account which the company keeps of its share capital, or any other account created on or after 1 July 1998 where the first amount credited to the account was an amount of share capital. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. The amount of the capital gain is equal to that excess. 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)). Accordingly, the principal asset test in section 855-30 will not be satisfied. However paragraph (d) of the definition of dividend specifically 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. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). capital reductions Division 230 does not apply to individuals unless they have made an election for it to apply. You received 200 cents for every share you held as a registered holder on the record date of 4:00pm (Perth time) 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 shareholders. 22. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). 52. The capital return was $2.50 per share. 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. 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. 1. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. 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 116-20(1) a capital payment (it was not classed as a dividend for any purpose and had no dividend component). 53. 4:00pm (Perth time) Friday, 19 November 2021. 26. 20. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. What was the capital return?Wesfarmers made a cash payment to shareholders of 200cents per share (or approximately $2,268 million in total). 65. Each of these conditions is considered in this Ruling. Australian Taxation Office (ATO) Class Ruling . Section 45B - schemes to provide capital benefits. 51. ITAA 1997 Div 110 In broad terms, section 45B of the ITAA 1936 applies where: 49. 22. . 18. Taking into account Wesfarmers robust credit metrics and continued strong cash flows, the Board considered that the return of capital would not adversely affect Wesfarmers credit rating. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 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. 60. This is clearly marked. You calculate your capital gain using the: Indexed cost base or discount method, whichever gives you the better result*, On or after 21 September 1999 and before 15December 2002, Discount method (after applying any capital losses - including unapplied capital losses from previous years). For information on the different methods you can use to work out your capital gain, see the Guide to capital gains tax. Collectively, shareholders received a total distribution of approximately $2,268million. 44. CGT event G1 in section 104-135 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 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. Eligible shareholders received 1 COL share for each WES share owned. 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. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 46. 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). . If a Wesfarmers shareholder makes a capital gain from CGT event G1 happening, the cost base and reduced cost base of the Wesfarmers share is reduced to nil. 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). 2. 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. This Ruling applies from 1 July 2021 to 30 June 2022. This is clearly marked. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. The following tables sets out what method you can use. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. 70. ITAA 1936 45B(5) 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. 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 1997 Div 109-A 37. The capital return was completed on 18December 2003. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. ITAA 1936 45C(1) If you did not make a capital gain on the return of capital, there is nothing you need to include on your 2003-04 tax return regarding this CGT event. 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. Note: ITAA 1997 855-30 A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. For the year ended 30 June 2013, Wesfarmers' retained earnings will be $2,375 million ($1,160 million post final dividend). 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. 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. There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. ITAA 1997 855-10 The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. to make a short-term or 'one-off' commercial gain. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. ITAA 1997 855-10 The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. Shares commence trading on an ex return of capital basis. Ruling Return of capital is not a dividend 7. 61. What are the shareholder tax implications of the capital return? 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 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 return of capital was announced on 27 August 2021 and was approved by shareholders at the Wesfarmers Annual General Meeting on 21 October 2021. ATO references: This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. Under the return of capital, all shareholders were treated in the same manner. Applies where: 49, section 45B is defined under subsection 995-1 ( 1 ) of the ITAA 1997 as... Of his shares before the return of capital ( & # x27 ; ) if the capital return Assessment 1997. 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