The Commissioner will not make a determination under either If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. A Wesfarmers shareholder cannot make a capital loss from CGT event G1 happening (subsection 104-135(3) of the ITAA 1997). The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. The capital return was completed on 18December 2003. 66. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. ITAA 1997 975-300 45. 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. 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. Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. 52. 14. If the scheme is not carried out as described, this Ruling cannot be relied upon. 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. 50. The test of purpose is an objective one. ATO references: Wesfarmers Limited - demerger of Coles Group Limited which was released on 14 December 2018. ITAA 1997 Div 115 Annual General Meeting, at which shareholders voted to approve the return of capital. A Wesfarmers shareholder will make a capital gain if the capital proceeds from the ending of the right are more than its cost base. 28. This is clearly marked. 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). Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. CGT events C1-C3 - end of a CGT asset 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. 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. The payment was entirely capital in nature with no dividend component. 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. 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. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. ITAA 1997 116-20(1) 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. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). Bunnings Limited shareholders offered $11.20 for each Bunnings share or $25.80 plus 2 Wesfarmers shares plus 1 Wesfarmers option ($12.50) for every 4 Bunnings shares 6 Nov 1989 Renounceable rights offer - 1 for 7 at a price of $4.25 per share 13 Jan 1989 Share split - each $1.00 share split into 2 x 50 cent shares 22 Apr 1987 The share consolidation is conditional upon the approval by shareholders of an ordinary resolution. 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 item 1, 2 or 5; an option or right to acquire a CGT asset covered by item 1, 2 or 3, and. You received $2.50 for each share that you held on the record date. However, having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme was entered into or carried out for a more than incidental purpose of enabling Wesfarmers shareholders to obtain a tax benefit. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). Maria's capital gain is $200 ($2,500 - $2,300). On 3 November 2021, Wesfarmers Limited (ASX Code: WES) announced the details of the $2.00 capital return. ITAA 1997 104-25(3) A return of capital would ordinarily be subject to the CGT provisions of the income tax law. The cost base of a Wesfarmers shareholder's right to receive the return of capital is worked out under Division 110 of the ITAA 1997 (modified by Division 112 of the ITAA 1997). 10. ITAA 1936 45B(5)(b) Make sure you have the information for the right year before making decisions based on that information. 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. Shareholders who did not provide the share registry with their bank account details, may complete a paper Direct Credit Payment Form, which is available from Wesfarmers share registry, Computershare Investor Services Pty Limited, or provide their details online to Computershare at www.computershare.com.au/easyupdate/wes. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. 79. ITAA 1997 855-10(1) Note: Under the return of capital, all shareholders were treated in the same manner. 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. ITAA 1936 45B ITAA 1936 45B(9) according to an ATO ruling. What will happen to the number of shares I hold? 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. Division 230 does not apply to individuals unless they have made an election for it to apply. 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. As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. TD 2000/10, Subject References: The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). 46. ITAA 1997 104-25 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. 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? 30. 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). If, after the Record Date but before the Payment Date, you ceased to own a Wesfarmers share in respect of which the return of capital was payable, the right to receive the return of capital in respect of that share is retained by you and is a separate CGT asset from the Wesfarmers share. ITAA 1997 104-135(3) : Yes. How do I provide, update or check my bank account details? Section 45B of the ITAA 1936 applies where certain capital payments are made to shareholders in substitution for dividends. Section 45A of the ITAA 1936 generally applies where: 45. You have made a capital gain if your cost base per share on the record date (15December 2003) was less than the amount you received for each share ($2.50). As with dividend payments, payments of the distribution to shareholders with a registered address in Australia, New Zealand and the United Kingdom were made by way of direct credit to a financial institution in Australia, New Zealand or the United Kingdom, as applicable, (including a bank, building society or credit union account). Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). 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 104-135 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. The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third. 9. 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. The following description of the scheme is based on information provided by the applicant. ITAA 1936 45A(2) However, paragraph (d) of the definition of dividend 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. 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. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. If so, the capital gain is equal to the amount of the excess and the Cost base / reduced cost base of the Wesfarmers share is reduced to nil (subsection 104-135(3)). 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