If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. Please find below some information and frequently asked questions in relation to the 2021capital return. 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. 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). As a result of the return of capital, you must adjust the cost base of your Wesfarmers shares. 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)). 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. 9. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 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. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). Sections 45A, 45B and 45C of the ITAA 1936 do not apply. NO 1-PVCWOSF, Legislative References: The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. ITAA 1997 104-135(4) 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 104-25(3) ITAA 1997 975-300(3) Make sure you have the information for the right year before making decisions based on that information. 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. Corporate Archer Materials Limited (ACN: 123 993 233) ATO Class Ruling Lot Fourteen, Frome Road, Adelaide SA 5000 ASX Announcement (ASX: AXE) 16 December 2021 Capital Return - ATO Class Ruling Published Archer Materials Limited ("Archer", the "Company", "ASX:AXE") advises that the Australian Taxation Office has published a Class Ruling (CR 2021/98) (the "Ruling") relating to the . 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. 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 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). 30. Recording the capital gain on the tax return. 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. Specifically, the provision applies where: 48. Depending on the outcome, you may have to include some details on your 2003-04 tax return. 34. 74. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. TAA 1953 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. All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. ITAA 1997 115-25(1) Mark purchased 200 Wesfarmers shares in December 2000. 10. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. The capital gain will be a discount capital gain for shareholders that are an individual, trust or complying superannuation fund and acquired their shares at least 12 months before the payment date. 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. The capital return distribution was paid on Thursday, 2 December 2021. In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. 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. 30. Demerger tax relief gives certain Wesfarmers shareholders the choice to defer the Australian capital gains tax (CGT) consequences that arise as a result of a Wesfarmers shareholder receiving Coles shares under the demerger. Some of the information on this website applies to a specific financial year. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). 23. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. A return of capital would ordinarily be subject to the CGT provisions of the income tax law. Who this Ruling applies to 4. This is clearly marked. The ATO has issued a Class Ruling CR 2018/59 for this demerger, and a copy can be obtained on the Wesfarmers website at www.wesfarmers.com.au. 4:00pm (Perth time) Friday, 19 November 2021. It is anticipated that shareholder approval will be sought at the AGM scheduled for 7 November 2013. ITAA 1997 855-10 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. For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. ITAA 1936 45B 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. The return of capital . The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. Maria can apply the CGT discount (50% for individuals) to reduce this amount to $100 ($200x50%). Did I have the choice to participate in the capital return? ITAA 1997 Div 110 He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 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. ITAA 1997 Div 112 18. 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. ITAA 1997 855-30 ITAA 1997 116-20(1) 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). There was no dividend component as part of this capital management initiative. Accordingly, section 45A has no application to the return of capital. 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. 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. The following description of the scheme is based on information provided by the applicant. 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. All Wesfarmers shareholders on 15 December 2003 (the record date) received the capital return. Wesfarmers shareholders received a $1.00 per share cash distribution. As at 30 June 2021, Wesfarmers' share capital was $15.818 billion. Paragraph 45A(3)(b) of the ITAA 1936 provides that capital benefits include the distribution of share capital. If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. This is clearly marked. If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. The test of purpose is an objective one. Corporations Act 2001. 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. 11. 17. 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. 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. CGT event C2 happened when the return of capital was made. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. 18. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. 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. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. Mark received a total of $500 (200 x $2.50) in the return of capital. If the scheme is not carried out as described, this Ruling cannot be relied upon. ITAA 1936 45B(3)(b) . 2. 21. 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'. 52. Return of Capital = $750 Fully Franked Dividend = $250 Units on hand after consolidation: 983 (1000 x 0.9827 - rounded to the next whole number of shares - See Point 25 in the ATO Class Ruling 2014/76 ). 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. 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). The ruling applies from 1 July 2021 to 30 June 2022. 25. ITAA 1997 975-300(3) 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. Maria's capital gain is $200 ($2,500 - $2,300). 33. The application of sections 45A, 45B and 45C to the return of capital. ITAA 1997 Div 197 ITAA 1936 44(1) ITAA 1997 104-135(4) ITAA 1936 45C(1) * 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. 10. 71. 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). 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. Each of these conditions is considered in this Ruling. 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. 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. 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. Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited, Personal investors guide to capital gains tax, Aboriginal and Torres Strait Islander people, you are an Australian resident for tax purposes, you held shares in Wesfarmers and received the return of capital in December2003, you did not acquire your shares under an employee share scheme, and. 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. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. 64. Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. purchased their shares after the shares started trading on an ex return of capital basis (i.e., from Thursday, 18 November 2021 onwards), the cost base for each share acquired after 19 September 1985 should be reduced by the return of capital amount (on a cents per share basis) for the purpose of calculating any capital gain or capital loss on the ultimate disposal of that share; and. 12. share capital, Legislative References: 81. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. 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. Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). ITAA 1936 45B(3) The Commissioner will not make a determination under either ITAA 1936 45A(2) 44. What are the capital gains tax consequences for me? 35. 25. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. ITAA 1936 318 Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. Without the capital return or some other capital management initiative, we estimate that the ratio would be around 44 per cent at the end of the current financial year." Mr Chaney said the tax office had provided a written draft class ruling at the end of last week, enabling the Board to consider the issue at today's meeting. 22. 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. CGT events G1-G3 - shares Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. Division 230 does not apply to individuals unless they have made an election for it to apply. 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. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. To be eligible to receive the return of capital, you needed to be a registered shareholder on the record date for determining entitlements, which was 4.00pm (Perth time) on Friday, 19 November 2021. 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. Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. 28. 4 September 2013. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. 20. Income tax: Capital management distribution: Wesfarmers Limited . There were no CGT events affecting the cost base of his shares before the return of capital in December 2003. ato class ruling wesfarmers return of capital. 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. CGT events C1-C3 - end of a CGT asset The Commissioner will not make a determination under either 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)). 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). 60. 38. 76. Payments made to credit unions may take longer. The Commissioner will not make a determination under either subsection 45A(2) of the ITAA 1936 or paragraph 45B(3)(b) of the ITAA 1936 that section 45C of the ITAA 1936 applies to any part of the return of capital of $2.00 per Wesfarmers share you received on the Payment Date. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. Wesfarmers will reduce its share capital by returning $0.50 per fully paid share (being ordinary shares and partially protected ordinary shares). 43. 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. : Yes. 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. 14. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. 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. 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: For your other shares - reduce the cost base and reduced cost base by $2.50 each. The ATO ruling, if 40. 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). 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. Section 45A - streaming of dividends and capital benefits. ITAA 1997 Div 115 In broad terms, section 45B of the ITAA 1936 applies where: 49. 13. 21. ITAA 1997 104-135 The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. 31. 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. Ruling Return of capital is not a dividend 7. ITAA 1997 975-300 Since 2009, Wesfarmers has reported the following retained earnings: 17. 22. By . 53. 48. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 49. 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. 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. 64. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . No part of the return of capital to a Wesfarmers shareholder will be a dividend, nor included in a shareholder's assessable income. 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. A Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for capital gains tax (CGT) purposes, and 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 under section 855-10, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: 15. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. 72. 19. This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. ATO references: TAA 1953 The return of capital will be debited to Wesfarmers share capital account. 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 uplift factor is worked out by dividing 123.4 by the consumer price index for the December quarter of 1986 (79.8) and is 1.546 (rounded to three decimal places). This is clearly marked. 6. Last date for trading in cum return of capital for shares. Did the Dividend Investment Plan (DIP) apply? 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. 59. Australian Taxation Office for the Commonwealth of Australia. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021. 69. 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). NO 1-4UM8A44, Related Rulings/Determinations: The payment was entirely capital in nature with no dividend component. Components of the capital return The capital return was $2.50 per share. ITAA 1997 104-165(3) This Ruling applies from 1 July 2021 to 30 June 2022. 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). 70. according to an ATO ruling. 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. In particular: 26. Shares commence trading on an ex return of capital basis. 59. 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 requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 37. ITAA 1997 975-300 The table sets out these five categories of CGT assets: 77. Collectively, shareholders received a total distribution of approximately $1,143 million. Australian Taxation Office (ATO) Class Ruling . Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . 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