This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 35. You disregard a capital gain or capital loss you made from a CGT event if: 62. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. 19. The Commissioner makes this Ruling based on the precise scheme identified in this Ruling. 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. The return of capital satisfies the first two conditions. 61. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. If the return of capital is approved by shareholders at the 2013 . Taxation Administration Act 1953. The payment was entirely capital in nature with no dividend component. 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 your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 7. 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. 31. 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. ITAA 1997 855-30 ITAA 1997 104-25 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. The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 19. The Payment Date is anticipated to be in mid to late December 2014. 3. Maria must reduce the cost base of her shares by $2,500 to $1,055.80. 66. No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. 42. Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . ITAA 1997 Div 115 TR 2006/10 ITAA 1997 975-300 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). This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 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). 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. 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. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its 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. 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'. For the purposes of paragraph 45B(2)(c), the Commissioner is required to consider the 'relevant circumstances' set out in subsection 45B(8) to determine whether any part of the scheme would be entered into for a purpose, other than an incidental purpose, of enabling a relevant taxpayer to obtain a tax benefit. 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. 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. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 24. ITAA 1997 104-135(3) 55. Section 45B - schemes to provide capital benefits. 1. 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. The table sets out these five categories of CGT assets: 77. AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA. 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. . 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. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. 76. 4. 31. 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. 58. Accordingly, the principal asset test in section 855-30 will not be satisfied. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). The ruling applies from 1 July 2021 to 30 June 2022. 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. . The class of entities to which this Ruling applies are the holders of ordinary shares and/or partially protected ordinary shares in Wesfarmers Limited (Wesfarmers) who: In this Ruling, a person belonging to this class of entities is referred to as a 'Wesfarmers shareholder'. Make sure you have the information for the right year before making decisions based on that information. 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). ITAA 1997 104-25 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). 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. 32. ITAA 1997 975-300(3) 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)). This amount represents your capital proceeds. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. The following description of the scheme is based on information provided by the applicant. 9. 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. 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. Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). 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. Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. CGT event G1 happened on the Payment Date when Wesfarmers paid you the return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and continued to own at the Payment Date (section 104-135). Section 45A - streaming of dividends and capital benefits. 21. 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. 21. CGT events C1-C3 - end of a CGT asset : Yes. 12. 11. This is clearly marked. The summary in these documents and in this section is general in nature and should not be relied upon as advice. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. For information on how to work out the cost base (and reduced cost base) for shares, see the Guide to capital gains tax. 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. according to an ATO ruling. 71. 29. 56. CGT event C2 in section 104-25 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 but which they cease to own before the Payment Date. 6. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . 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. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. 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. The return of capital . Make sure you have the information for the right year before making decisions based on that information. The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. 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. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. 62. 26. The high dividend payout policy is intended to be maintained following the return of capital to shareholders. 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 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. 45. 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). In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. 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. Shareholders are sent return of capital payment advice. 10. ITAA 1936 45B(2)(a) He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. Expand Company Description ATO Class Ruling - return of capital to shareholders StockBot 357,511 posts about a year ago WES released this announcement to the ASX on 8 December 2021, 17:19. This is clearly marked. ITAA 1936 45A Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. 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