53. . Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. ITAA 1936 45A ITAA 1997 115-25(1) 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 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). ITAA 1936 45C(1) This payment was: At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. Eligible shareholders received 1 COL share for each WES share owned. Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. Sections 45A, 45B and 45C of the ITAA 1936 do not apply. On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. 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. Some of the information on this website applies to a specific financial year. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. 42. ITAA 1936 45C(2) 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. No capital loss can be made from CGT event G1 (Note 1 to subsection 104- 135(3)). 50. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). 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. 33. Collectively, shareholders received a total distribution of approximately $1,143 million. . 78. 67. 45. A copy of the Class Ruling is available from the Wesfarmers website (www.wesfarmers.com.au). Following the payment of the special dividends, Wesfarmers determined that $2.3 billion of the remaining balance of the proceeds from the asset disposals of approximately $2.925 billion was surplus to its capital requirements. 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. 6. 14. ITAA 1997 855-10 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'. 30. 3. 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. This represents a total return of approximately $579 million to Wesfarmers shareholders. 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. What are the shareholder tax implications of the capital return? The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. Non-resident shareholders should seek specific advice in relation to the tax consequences arising from the return of capital under the laws of their country of residence. 37. 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 Class ITAA 1936 45A(3)(b) The share consolidation will be undertaken in accordance with section 254H of the Corporations Act such that: 27. 21. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Wesfarmers shareholders received a 200 cents per share cash distribution. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. 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. 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'. Accordingly, section 45A has no application to the return of capital. 37. 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 capital return has been approved by the shareholders. 8. 65. ITAA 1997 104-135(4) It states that a person is provided with a capital benefit if: 52. 4. 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. 19. ITAA 1936 45B A return of capital would ordinarily be subject to the CGT provisions of the income tax law. 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). 61. 4 September 2013. 20. 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 provided separate information in relation to the tax implications of the return of capital payment for participants who were located within Hong Kong and India at the time of the capital return payment. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Wesfarmers shares at least 12 months before the Payment Date (subsection 115-25(1)), provided the other conditions in Subdivision 115-A are satisfied. 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. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. This is clearly marked. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. The share consolidation will occur after the return of capital to Wesfarmers shareholders, and will be applied to both the fully paid ordinary shares and the partially protected ordinary shares. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. 1. The amount of the capital gain is equal to that excess. In working out the capital gain or capital loss made when CGT event C2 happens, the capital proceeds will be the amount of the return of capital ($0.50 per fully paid share) (subsection 116-20(1) of the ITAA 1997). 9. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. Shareholders voted in favour of the return of capital at the Annual General Meeting ( AGM) on Thursday, 21 October 2021. (iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan. 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. How much did I receive and how was the payment made? Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. ITAA 1936 45B(3) 20. 39. ITAA 1997 975-300(3) 44. ITAA 1997 975-300(3) 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). CGT event G1 happened when Wesfarmers made the return of capital to you in respect of Wesfarmers shares you owned at the Record Date and continued to own at the Payment Date (section 104-135). In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. 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. ITAA 1936 45B Will my shares be worth less after the capital return? ITAA 1936 45B(5) The Ruling continues to apply after 30 June 2014 to all entities within the specified class who entered into the specified scheme during the term of the Ruling. Since 2009, the dividend payout of Wesfarmers has been as follows: 14. A capital benefit was provided to Wesfarmers' shareholders. Accordingly, the principal asset test in section 855-30 will not be satisfied. 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. The table sets out these five categories of CGT assets: 77. 56. The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. CGT event C2 (section 104-25 of the ITAA 1997) will happen when the return of capital is paid. 81. 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. 25. There was no dividend component as part of this capital management initiative. CGT event G1 (section 104-135 of the ITAA 1997) happens when. 6. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. 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. ATO Class Ruling - return of capital to shareholders. Since 2009, Wesfarmers has reported the following retained earnings: 17. ITAA 1997 104-25 63. 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. ITAA 1997 Div 112 ITAA 1936 45B(2)(b) 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. $ 1,143 million reducing balance sheet flexibility an equal reduction of Wesfarmers has approved... 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