Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. ITAA 1997 975-300(3) Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. Make sure you have the information for the right year before making decisions based on that information. For those shareholders who are tax residents of Australia and hold their shares on capital account at the time the return of capital is paid, no part of the return of capital should be treated as a dividend for income tax purposes. ITAA 1997 104-135 if the cost base (after any adjustment, as may be relevant, for any indexation, any previous return of capital or as a result of the Coles demerger) of a share acquired after 19 September 1985 is less than the return of capital amount (on a cents per share basis), then an immediate capital gain will arise for the difference. By . Section 45A applies in circumstances where capital benefits are streamed to certain shareholders (the advantaged shareholders) who derive a greater benefit from the receipt of capital and it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received or will receive dividends. ITAA 1997 104-135(4) The capital return distribution was paid on Thursday, 2 December 2021. The return of capital satisfies the first two conditions. ITAA 1936 45B(3) Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Wesfarmers expects that dividends will continue to be paid in the future on a regular and sustainable basis in line with its dividend policy. Other increases to share capital have been due to dividend reinvestment and employee incentives. 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). ITAA 1997 Div 115 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. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200cents per share. 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) of the ITAA 1997 (choosing to disregard a capital gain or capital loss on ceasing to be an Australian resident). 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). 8. 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. 43. The only relevant category of taxable Australian property is table item 2 of section 855-15. ITAA 1997 Div 112 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. In broad terms, section 45B of the ITAA 1936 applies where: 49. Wesfarmers Limited was founded in 1914 and is headquartered in Perth, Australia. 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. A fact sheet on the tax consequences for Australian resident shareholders who received a return of capital on their Wesfarmers' shares. 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. ITAA 1936 45B 42. ITAA 1936 45A(3)(b) 11. Shareholders are sent return of capital payment advice. 80. The Class Ruling does not apply to Wesfarmers shareholders who hold their shares on revenue account or as trading stock. 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. 19. ITAA 1997 104-25(3) 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. 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. 76. 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. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). 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. ITAA 1997 995-1(1) This announcement was authorised to be given to the ASX by the Wesfarmers Company Secretary. 47. 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. Recording the capital gain on the tax return. 36. The ATO ruling, if Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. The table sets out these five categories of CGT assets: 77. What are the capital gains tax consequences for me? 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). 32. Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. 4 September 2013. ITAA 1997 855-10(1) The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 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. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. 13. 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. 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 new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. 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. | August 8, 2022 58. The converted shares will have the same date of acquisition as the original shares to which they relate. However paragraph (d) of the definition of dividend specifically 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. 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. 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. CGT event G1 in section 104-135 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 and continue to own at the Payment Date. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 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. 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). NEWS 11 September 2013 ATO CLASS RULING ON CAPITAL RETURN PROPOSAL The Australian Taxation Office has published a Class Ruling relating to. Last date for trading in cum return of capital for shares. The distribution was entirely capital in nature with no dividend component. 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. 29. 56. Wesfarmers has advised the total market value of its assets that are not taxable Australian real property is greater than the market value of its taxable Australian real property assets. The capital return was completed on 18December 2003. 7. The amount of the capital gain is equal to that excess. 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. Subsection 975-300(3) of the ITAA 1997 states that an account is not a share capital account if it is tainted. 1. 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