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'. If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. 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. A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. For your other shares - reduce the cost base and reduced cost base by $2.50 each. 22. Mark purchased 200 Wesfarmers shares in December 2000. The test of purpose is an objective one. 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 Div 112 4 September 2013. 25. It states that a person is provided with a capital benefit if: 52. 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. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. Eligible shareholders received 1 COL share for each WES share owned. The return of capital constituted an equal reduction of Wesfarmers share capital for the purposes of Part2J.Iof the Corporations Act 2001 (Cth). Wesfarmers share capital has increased from $2.2 billion in July 2007, to $23 billion in June 2012. Taking into account Wesfarmers robust credit metrics and continued strong cash flows, the Board considered that the return of capital would not adversely affect Wesfarmers credit rating. The return of capital was in addition to the interim dividend of 88 cents per Wesfarmers share paid on 31 March 2021 and a final dividend of 90 cents per share for the year ended 30 June 2021 paid by Wesfarmers on 7 October 2021. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. 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). For the shares you made a capital gain on - reduce their cost base and reduced cost base to nil. 16. Note: 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. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. 24. 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. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 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. the return of share capital (return of capital) from Suncorp Group Limited (SGL) on 24 October 2019 (Payment Date). All legislative references in this Ruling are to the Income Tax Assessment Act 1997, unless otherwise indicated. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. 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). Mark has not made a capital gain on his shares as a result of the capital return so he does not have to put anything on his 2003-04 tax return to reflect this event. Ruling Return of capital is not a dividend 7. At the Annual General Meeting, held on 21 October 2021, Wesfarmers shareholders approved the return of capital. On 3 November 2003 Wesfarmers Limited announced a return of capital ('capital return'). ITAA 1997 855-15 54. Wesfarmers shareholders received a $1.00 per share cash distribution. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. 51. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . Make sure you have the information for the right year before making decisions based on that information. The record date for the capital return payment was 4:00pm(Perth time) on Friday, 19 November 2021. 44. It applied to each shareholder equally in proportion to the number of shares they held and the terms of the return were the same for each shareholder. The Record Date for the return of capital is expected to be on 15 November 2013. 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. 14. 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'. 9. Specifically, the provision applies where: 48. Shares in Wesfarmers will be 'an indirect Australian real property interest' if (among other things) they pass the principal asset test in section 855-30. 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. 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). 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). 2. 64. Mark received a total of $500 (200 x $2.50) in the return of capital. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. There was no dividend component as part of this capital management initiative. 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. The capital return was completed on 18December 2003. ITAA 1936 45A(3)(b) 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 such, paragraph (d) of the definition of 'dividend' in subsection 6(1) of the ITAA 1936 applies and the return of capital is not a dividend. She must use the indexed cost base method in all future events affecting these shares. Maria purchased 1,000 Wesfarmers shares in December 1986. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. The distribution was entirely capital in nature. 1. they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. 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. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). Copyright Act 1968 This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. 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. 25. Expand Company Description ATO Class Ruling - return of capital to shareholders StockBot 357,511 posts about a year ago WES released this announcement to the ASX on 8 December 2021, 17:19. This publication provides you with the following level of protection: This publication (excluding appendixes) is a public ruling for the purposes of the . ITAA 1936 45B(3) The capital loss is equal to the amount of the difference (subsection 104-25(3)). 37. ITAA 1936 45B(8) ITAA 1997 104-135(3) Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . The effect of such a determination is that all or part of the return of capital received by Wesfarmers shareholders is treated as an unfranked dividend paid by Wesfarmers out of profits. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. 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. : Yes. 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. ITAA 1997 Div 112 47. 25. 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. 55. Ruling Return of capital is not a dividend 7. 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