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Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. 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. 24. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. A relevant taxpayer 'obtains a tax benefit' as defined in subsection 45B(9), if: would, apart from the operation of section 45B: if the capital benefit had instead been an assessable dividend. Division 230 does not apply to individuals unless they have made an election for it to apply. 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. ATO Class Ruling - return of capital to shareholders. 1. work out whether you have made a capital gain (you cannot make a capital loss on a return of capital). 38. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. Wesfarmers shareholders received a $1.00 per share cash distribution. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. 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 return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. There was no share consolidation in relation to the capital return. How can I calculate my return of capital payment and when will I receive this payment? 2. 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. What will happen to the number of shares I hold? ITAA 1936 45B(3) 39. 17. This is clearly marked. Wesfarmers Chemicals, Energy and Fertilisers, People development, diversity and inclusion, Chairman and Managing Director's 2022 sustainability message, Bunnings collaborates with Indigenous artists through exclusive plant pots range, Bunnings support for flood affected communities, Bunnings launches national battery recycling programs, Bunnings expands fleet with all electric trucks, Information for participants of the Wesfarmers employee share plans. 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. The effect of such a determination is that all or part of the return of capital received by Wesfarmers shareholders is treated as an unfranked dividend paid by Wesfarmers out of profits. The only relevant category of taxable Australian property is table item 2 of section 855-15. Wesfarmers Limited (WES) - Demerger . 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). 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. Income tax: Capital management distribution: Wesfarmers Limited . 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. 54. You received $2.50 for each share that you held on the record date. 33. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. ITAA 1997 855-30 Taxation Administration Act 1953. 69. 47. If the return of capital ($0.50 per fully paid share) is not more than the cost base of the Wesfarmers share at the Payment Date, the cost base and reduced cost base of the share will be reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4) of the ITAA 1997). Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. 31. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. The return of capital was made possible by the Wesfarmers Groups continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. ITAA 1997 855-10(1) Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. ITAA 1997 855-10 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. 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). That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. Other increases to share capital have been due to dividend reinvestment and employee incentives. The return of capital will be debited against an amount standing to the credit of Wesfarmers' share capital account. For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. ITAA 1997 104-135(4) What are the capital gains tax consequences for me? 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. Depending on the outcome, you may have to include some details on your 2003-04 tax return. Corporations Act 2001 256C. Commissioner of Taxation Some of the information on this website applies to a specific financial year. 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). Where the original shares were acquired on or after 20 September 1985, subsection 112-25(4) of the ITAA 1997 provides that each element of the cost base and reduced cost base of the converted shares is the sum of the corresponding elements of each original share. 35. Recording the capital gain on the tax return. Will my shares be worth less after the capital return? The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 9. The application of sections 45A, 45B and 45C to the return of capital. 13. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. Income tax: Capital management distribution: Wesfarmers Limited . 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 return of capital was announced on 27 August 2021 and was approved by shareholders at the Wesfarmers Annual General Meeting on 21 October 2021. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. ITAA 1936 45A The following description of the scheme is based on information provided by the applicant. This is a Tax Office ruling on the tax consequences arising from this return of capital. 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. 1. TAA 1953 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). The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. Section 45B applies where certain capital payments are made to shareholders in substitution for dividends. ITAA 1997 115-25(1) 39. 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. The return of capital will be debited to Wesfarmers share capital account. 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. In broad terms, section 45B of the ITAA 1936 applies where: 49. 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 return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. 82. 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 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. ITAA 1997 104-135 Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. How did the capital return work and what was the effect on the company? 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). This Ruling applies from 1 July 2021 to 30 June 2022. ITAA 1936 45B(5) ITAA 1997 115-25(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. The Commissioner will not make a determination under either 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)). 50. 4 September 2013. 36. : Yes. In working out the capital gain or capital loss when CGT event C2 happens, the capital proceeds are equal to the amount of the return of capital ($2.00 per Wesfarmers share) (subsection 116-20(1)). 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. 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. This amount represents your capital proceeds. ITAA 1936 45B(3)(b) 12. 2. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). The phrase 'provided with a capital benefit' is defined in subsection 45B(5). 29. ITAA 1997 995-1(1) 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? 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). How much did I receive and how was the payment made? Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 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 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. Having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme is proposed to be entered into for a more than incidental purpose of enabling a taxpayer to obtain a tax benefit. TD 2000/10, Subject References: Bunnings Limited shareholders offered $11.20 for each Bunnings share or $25.80 plus 2 Wesfarmers shares plus 1 Wesfarmers option ($12.50) for every 4 Bunnings shares 6 Nov 1989 Renounceable rights offer - 1 for 7 at a price of $4.25 per share 13 Jan 1989 Share split - each $1.00 share split into 2 x 50 cent shares 22 Apr 1987 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. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. 33. Accordingly, section 45A has no application to the return of capital. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. The Record Date for the return of capital is expected to be on 15 November 2013. 53. The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. Please find below some information and frequently asked questions in relation to the 2021capital return. 41. 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. ITAA 1997 104-25(3) What are the key dates for the capital return? . ITAA 1997 104-135(3) ITAA 1936 45C ITAA 1936 45A 3. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). 30. The return of capital was recorded as a debit to Wesfarmers untainted share capital account. Collectively, shareholders received a total distribution of approximately $1,143 million. Collectively, shareholders received a total distribution of approximately $2,268million. 54. 5. Section 45B - scheme to provide capital benefits. 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. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. The ATO has issued Class Ruling CR 2018/59 . 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. 19. 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. By . '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. This is clearly marked. . Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. 53. This is due to the outflow of funds to shareholders. 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). CGT event C2 happened when the return of capital was made. Under with section 112-25 of the ITAA 1997, the consolidation of Wesfarmers shares will not result in a CGT event happening where the company converts its shares in accordance with section 254H of the Corporations Act. 16. This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. 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). 47. 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? 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. 22. 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