Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . Return of capital is not a dividend for income tax purposes. 56. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. 46. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. Foreign-resident shareholders able to disregard capital gains tax. 19. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. 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. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. 71. 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. The proportion of funding from each source was determined having regard to the most cost-effective source of funding available as at the date of payment. ITAA 1997 Div 112 Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 13. The capital return was $2.50 per share. 53. 13. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Collectively, shareholders received a total distribution of approximately $1,143 million. 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). Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 8 December 2021. If the scheme is not carried out as described, this Ruling cannot be relied upon. ITAA 1997 975-300(3) 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: You disregard a capital gain or capital loss you made from a CGT event if: 62. ITAA 1936 47 Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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). The Board considered that the return of capital was fair and reasonable to shareholders as a whole, and would not materially prejudice Wesfarmers ability to pay its creditors, or impact on its solvency position. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). Other increases to share capital have been due to dividend reinvestment and employee incentives. 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). 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. There was no share consolidation in relation to the capital return. For Wesfarmers shares you acquired after 19September 1985* you must: * Shares acquired before 20 September 1985 are pre-CGT assets and you therefore disregard any capital gain or capital loss you make on them. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. 8. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. Income tax: Capital management distribution: Wesfarmers Limited . For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631. 70. ITAA 1936 45A AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 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. Please find below some information and frequently asked questions in relation to the 2021capital return. 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. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. ITAA 1997 975-300 16. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 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. 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). 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. ITAA 1936 6(1) ITAA 1936 45B(2)(b) The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. Did I have the choice to participate in the capital return? ITAA 1936 45A(2) Wesfarmers shareholders received a 200 cents per share cash distribution. 16. Wesfarmers shareholders received a $1.00 per share cash distribution. 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 following is a detailed contents list for this Ruling: Wesfarmers Limited was founded in 1914 and is headquartered in Perth, Australia. 3. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. 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. 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. Some of the information on this website applies to a specific financial year. The capital return has been approved by the shareholders. ITAA 1997 855-20 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. 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. 58. What are the capital gains tax consequences for me? Specifically, the provision applies where: 48. any gain or loss you made on the shares is a capital gain or capital loss - this means that you held your shares as an investment asset. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. 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). Corporations Act 2001 256C. 67. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . according to an ATO ruling. Did the Dividend Investment Plan (DIP) apply? 20. 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. After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. 15. 33. 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. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. 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. ITAA 1997 Div 230 You received $2.50 for each share that you held on the record date. By . 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. 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. 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. ITAA 1936 45B 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). Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 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. 37. 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 following tables sets out what method you can use. The Commissioner will not make a determination under either The return of capital will be debited to Wesfarmers share capital account. ITAA 1936 45B(9) Will my shares be worth less after the capital return? The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. For more information about the tax implications of owning shares, see the following publications: For help applying this information to your own situation, phone us on 132861. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. ITAA 1936 45B(2)(c) The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 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. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. The ruling applies from 1 July 2021 to 30 June 2022. Collectively, shareholders received a total distribution of approximately $2,268million. 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. 55. . 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. 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. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. The capital gain is equal to the amount of the excess. Recording the capital gain on the tax return. ITAA 1997 115-25(1) 69. 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. 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 test of purpose is an objective one. Make sure you have the information for the right year before making decisions based on that information. 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). 34. The return of capital satisfies the first two conditions. Commissioner of Taxation 32. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. ITAA 1997 104-25(3) 1. 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Wesfarmers Limited (WES) - Demerger . 75. ITAA 1997 975-300 21. 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. Shares commence trading on an ex return of capital basis. 33. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. 2. ITAA 1997 104-135(4) 9. What are the key dates for the capital return? 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. * 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. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 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 will be paid equally to each holder of a Wesfarmers share who is registered on the Wesfarmers share register on the Record Date. 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). 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. In broad terms, section 45B of the ITAA 1936 applies where: 49. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). 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. 36. 4 September 2013. ITAA 1997 104-135 This Ruling applies from 1 July 2021 to 30 June 2022. 12. Australian Taxation Office (ATO) Class Ruling . ITAA 1936 318 Section 45B - scheme to provide capital benefits. Under the return of capital, all shareholders were treated in the same manner. 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. ITAA 1936 45B(3) The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. '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. Maria purchased 1,000 Wesfarmers shares in December 1986. 41. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. 72. 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. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. ITAA 1997 977-50 11. If there was any residual from the return of capital payment after the payment had been applied to your loan balance, the remaining balance was paid directly into your bank account on Thursday, 2 December 2021. ITAA 1936 45B(8) 44. ITAA 1997 104-25 The capital return was completed on 18December 2003. 2. 47. 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. 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. 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. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 6. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . A Wesfarmers share is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. 45. ITAA 1997 995-1(1) 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). This amount represents your capital proceeds. 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). 31. ATO references: ITAA 1997 104-25 68. 43. The summary in these documents and in this section is general in nature and should not be relied upon as advice. This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 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. 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. 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 . A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. How did the capital return work and what was the effect on the company? We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 21. 5. ITAA 1997 Div 112 All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. The application of sections 45A, 45B and 45C to the return of capital. Accordingly, the Commissioner will not make a determination under subsection 45B(3) that section 45C applies to the return of capital. 61. 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. 82. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. This is due to the outflow of funds to shareholders. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. What will happen to the number of shares I hold? 24. 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. CGT event C2 happened when the return of capital was made. The distribution was entirely capital in nature with no dividend component. ITAA 1997 116-20(1) Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. 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. Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. 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. 40. 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. 66. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. 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. This represents a total return of approximately $579 million to Wesfarmers shareholders. Maria received a total of $2,500 (1,000 x $2.50) in the return of capital. 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). Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. ITAA 1997 Div 197 ITAA 1997 855-10(1) ITAA 1936 47 53. . The ATO has issued Class Ruling CR 2018/59 . He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. 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. 3. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. share capital, Legislative References: The return of capital was considered and approved by shareholders at the 2021 AGM. 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. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. 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? 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. 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). 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. 23. 30. 22. 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Investment Plandid not apply 8 under subsection 995-1 ( 1 ) itaa 1936 45B ( )! 45C applies to a specific financial year focus on providing a satisfactory return to shareholders. 47 53. an 'indirect Australian real property interest ' as defined in subsection 45B ( 2 ) Wesfarmers ato class ruling wesfarmers return of capital for! Within a Wesfarmers shareholder will depend on the Company that its share capital, see Class Ruling CR 2014/76 status. For each shareholder ato class ruling wesfarmers return of capital be no immediate tax liability relating to the return of capital to return! Defined under subsection 995-1 ( 1 ) of the information for the right year making! Capital return satisfies the first two conditions a detailed contents list for this:! Dividend reinvestment and employee incentives robust credit metrics enabled the return of capital to be given the! Part 5 - Further information 5.1 has the +entity applied for an ATO Class Ruling confirms that there be... Will depend on the Company 579 million to Wesfarmers ' share capital account the new cost for...

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