ITAA 1936 45A For the shares you made a capital gain on - reduce their cost base and reduced cost base to nil. What are the shareholder tax implications of the capital return? 2. according to an ATO ruling. return of capital on shares The Commissioner will not make a determination under either 22. 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. Subsection 975-300(3) provides that an account is generally taken not to be a share capital account if it is tainted. 67. Wesfarmers has paid franked dividends to its shareholders to the maximum extent available based on its franking account balance. 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. Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. 47. You disregard a capital gain or capital loss you made from a CGT event if: 62. sold their shares while the shares were trading on a cum return of capital basis (i.e., before Wednesday, 17 November 2021); or. The following tables sets out what method you can use. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility. 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 . 9. This is clearly marked. ITAA 1997 Div 230 10. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? ITAA 1997 855-10 The share consolidation will occur after the return of capital to Wesfarmers shareholders, and will be applied to both the fully paid ordinary shares and the partially protected ordinary shares. 26. You calculate your capital gain using the: Indexed cost base or discount method, whichever gives you the better result*, On or after 21 September 1999 and before 15December 2002, Discount method (after applying any capital losses - including unapplied capital losses from previous years). 30. 63. It states that a person is provided with a capital benefit if: 52. Section 45B - scheme to provide capital benefits. Last date for trading in cum return of capital for shares. 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: In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. The capital return on your shares is a capital gain tax event that may have resulted in a capital gain for you. This is clearly marked. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. Will my shares be worth less after the capital return? This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. ITAA 1997 Div 110 22. As at March 2020, approximately 26.15% of Wesfarmers' shareholders are foreign residents (as defined in subsection 995-1(1)). 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). Maria's indexed cost base is $3,555.80 ($2,300 x 1.546). ato class ruling wesfarmers return of capitalsiesta key luxury hotels on the beach ato class ruling wesfarmers return of capital. 34. CGT event C2 happened when the return of capital was made. 31. 65. The Wesfarmers Dividend Investment Plandid not apply to the return of capital payment. Some of the information on this website applies to a specific financial year. The term 'taxable Australian property' is defined in the table in section 855-15 of the ITAA 1997. ITAA 1936 47 Shares commence trading on an ex return of capital basis. Consequently, receipt of the capital benefit by the Wesfarmers shareholders will be a tax benefit. This is clearly marked. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. 55. 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 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 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. capital reductions 13. Wesfarmers' share capital account (as defined in section 975-300) is not tainted (within the meaning of Division 197). 18. Following the payment of the special dividends, Wesfarmers determined that $2.3 billion of the remaining balance of the proceeds from the asset disposals of approximately $2.925 billion was surplus to its capital requirements. Maria can choose to apply either the indexation method or the discount method to calculate any capital gain. Also: No capital gain or capital loss should arise in respect to a share acquired on or before 19September 1985. Sections 45A, 45B and 45C of the ITAA 1936 do not apply. 8. The return of capital was funded by a combination of Wesfarmers' available cash balances and existing debt facilities. The return of capital was announced on 27 August 2021 and was approved by shareholders at the Wesfarmers Annual General Meeting on 21 October 2021. Note: certain information has been provided on a commercial-in-confidence basis and will not be disclosed or released under Freedom of Information legislation. The phrase 'provided with a capital benefit' is defined in subsection 45B(5). The relevant provisions dealt with in this Ruling are: All subsequent legislative references in this Ruling are to the ITAA 1936, unless otherwise stated. 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). 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)). Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. 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). 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. If any of your shares had a cost base of exactly $2.50, their new cost base and reduced cost base will be nil. ITAA 1997 995-1(1) Therefore, if the full cost base or reduced cost base of a Wesfarmers share has been previously applied in working out a capital gain or capital loss made when a CGT event happened to that share, the right to receive the return of capital is likely to have a nil cost base. 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. 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. Section 855-15 sets out the categories of CGT assets that are taxable Australian property: 63. By . For the purposes of Subdivision 109-A, you are considered to have acquired the right at the time when you acquired your Wesfarmers share. 11. 78. ATO Class Ruling - return of capital to shareholders. ITAA 1936 45B(3)(b) 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). In the event that the return of capital did represent a dividend rather than a capital benefit, it is likely that a Wesfarmers shareholder would incur a greater tax liability. Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Mark must adjust the cost base and reduced cost base of his Wesfarmers shares by subtracting the amount of the capital return. NO 1-PVCWOSF, Legislative References: 25. ITAA 1936 45A(2) 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. adjust the cost base and reduced cost base of your Wesfarmers shares. A capital benefit was provided to Wesfarmers' shareholders. The Record Date for the return of capital is expected to bein late November or early December 2014. The amount of the capital gain is equal to that excess. 70. ITAA 1997 855-10(1) Wesfarmers website ATO Class Ruling 2014/76 Capital Management Initiative Key Dates Scenario: The fund held 1000 shares as at the record date. No part of the return of capital paid to you by Wesfarmers on the Payment Date is a dividend as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Under the return of capital, all shareholders were treated in the same manner. In addition to the return of capital, Wesfarmers proposes to undertake a share consolidation of approximately 1 to 0.9876. 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. 5. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. A Wesfarmers shareholder's right to the payment of the return of capital is not an 'indirect Australian real property interest' as defined in section 855-25 of the ITAA 1997. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . 34. ITAA 1936 45B(2)(b) What will happen to the number of shares I hold? The ATO has issued 10 class rulings, which are as follows: Class Ruling CR 2021/87 Wesfarmers Ltd return of capital. 79. The return of capital was debited to Wesfarmers' share capital account and the following accounting entry was recorded: 27. Corporations Act 2001. 25. 32. 20. Commissioner of Taxation ITAA 1997 855-15 21. This payment was: A CGT event happened on 18 December 2003, when Wesfarmers made a capital return on the shares that you held in the company. 68. ITAA 1997 104-25(3) The new cost base for his share parcel is $2,550 ($3,050 - $500), or $12.75 per share. The return of capital satisfies the first two conditions. 5. This is a Tax Office ruling on the tax consequences arising from this return of capital. Taxation Administration Act 1953. . 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