. 10. You received $2.50 for each share that you held on the record date. What are the shareholder tax implications of the capital return? 47. The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. 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. CGT events C1-C3 - end of a CGT asset The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders. It is only to the extent (if any) that the distribution exceeds the cost base of the shares that a capital gain arises. 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. ITAA 1997 104-25(3) Did I have the choice to participate in the capital return? 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. 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. ITAA 1997 975-300(3) WES Indicative Capital Return Timetable Effective Date All trading in WES ETO contracts will be on an adjusted basis effective on the ex-date, Thursday, 18 November 2021. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. ITAA 1997 Div 110 Part 5 - Further information 5.1 Has the +entity applied for an ATO class ruling relating to this cash return of . Wesfarmers has confirmed that its share capital account (as defined in section 975-300 of the ITAA 1997) is not tainted (within the meaning of Division 197 of the ITAA 1997). 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. 20. 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. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. Maria purchased 1,000 Wesfarmers shares in December 1986. The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. ITAA 1997 Div 230 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: Recording the capital gain on the tax return. The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. 65. The capital gain is equal to the amount of the excess. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. ITAA 1997 977-50 they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . ITAA 1936 45C ITAA 1997 995-1(1) If the scheme is not carried out as described, this Ruling cannot be relied upon. 21. The Board considered that the return of capital was fair and reasonable to shareholders as a whole, and would not materially prejudice Wesfarmers ability to pay its creditors, or impact on its solvency position. 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. 71. 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. 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). No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital. 74. ITAA 1936 47 Section 45B - schemes to provide capital benefits. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . | August 8, 2022 ITAA 1936 45A(3)(b) 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. ITAA 1997 Div 230 9. The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). 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. Corporations Act 2001. 32. 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 return of capital was recorded as a debit to Wesfarmers untainted share capital account. The requisite purpose does not have to be the most influential or prevailing purpose but it must be more than an incidental purpose. ITAA 1936 45A(2) Division 230 does not apply to individuals unless they have made an election for it to apply. The Commissioner will not make a determination under section 45A or 45B that section 45C applies to the return of capital. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. dividend income The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. CGT event C2 happened when the return of capital was made. ATO Class Ruling - return of capital to shareholders. 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'. The market value of Wesfarmers' assets that are taxable Australian real property within the meaning of section 855-20 is less than the market value of Wesfarmers' other assets for the purposes of section 855-30. The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. Did the Dividend Investment Plan (DIP) apply? Mark received a total of $500 (200 x $2.50) in the return of capital. ITAA 1936 45B(3) 70. 38. 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'. Foreign-resident shareholders able to disregard capital gains tax. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. Accordingly, CGT event G1 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. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. The arrangement involving Wesfarmers return of capital to the Wesfarmers shareholders will constitute a 'scheme' for the purposes of section 45B. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. Section 45A - streaming of dividends and capital benefits. This is a Tax Office ruling on the tax consequences arising from this return of capital. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. ITAA 1997 Div 115 Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. ITAA 1936 45B 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). Some of the information on this website applies to a specific financial year. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. 26. 3. 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. What are the key dates for the capital return? 19. 60. 80. The ATO ruling, if 73. 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. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. There was no dividend component as part of this capital management initiative. This amount represents your capital proceeds. ITAA 1936 45C(2) 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. ITAA 1936 45C(1) 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). Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 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