As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021.
The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2 December 2021. The record date for the capital return payment was 4:00pm (Perth time) on Friday, 19 November 2021.
Please find below some information and frequently asked questions in relation to the 2021 capital return.
General information
Shareholder information
- Your shareholding
- Payment details
- Tax implications
- Information for participants of the Wesfarmers employee share plans
Key dates
What are the key dates for the capital return?
Thursday, 21 October 2021
- Annual General Meeting, at which shareholders voted to approve the return of capital.
Tuesday, 16 November 2021
- Effective date for return of capital.
Wednesday, 17 November 2021
- Last date for trading in ‘cum return of capital’ for shares.
Thursday, 18 November 2021
- Shares commence trading on an ‘ex return of capital’ basis.
4:00pm (Perth time) Friday, 19 November 2021
- Record date for determining entitlement to participate in the return of capital.
Thursday, 2 December 2021
- Payment date for return of capital.
- Shareholders are sent return of capital payment advice.
General information
Capital return overview
What was the capital return?
Wesfarmers made a cash payment to shareholders of 200 cents per share (or approximately $2,268 million in total). The payment was entirely capital in nature with no dividend component.
The capital return distribution was paid on Thursday, 2 December 2021. Under the return of capital, all shareholders were treated in the same manner. The return of capital constituted an equal reduction of Wesfarmers’ share capital for the purposes of Part 2J.I of the Corporations Act 2001 (Cth). 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.
Why was the capital return undertaken?
The capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. The return of capital was made possible by the Wesfarmers Group’s 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. 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. Continued strong cash flow generation and robust credit metrics enabled the return of capital to be undertaken without reducing balance sheet flexibility.
The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders.
How did the capital return work and what was the effect on the company?
Wesfarmers shareholders received a 200 cents per share cash distribution. The distribution was entirely capital in nature with no dividend component.
Collectively, shareholders received a total distribution of approximately $2,268 million. There was no share consolidation in relation to the capital return.
In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers’ credit rating. 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 funded by a combination of Wesfarmers’ available cash balances and existing debt facilities. The proportion of funding from each source was determined having regard to the most cost-effective source of funding available as at the date of payment.
In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. 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.
Having regard to Wesfarmers’ strong balance sheet and cash flow generation, together with its well‑established 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.
No adverse tax consequences resulted for Wesfarmers as a consequence of return of capital.
How will the capital return be funded?
The return of capital was made possible by the Wesfarmers Group’s 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. 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 capital was funded by a combination of Wesfarmers’ available cash balances and existing debt facilities. The proportion of funding from each source was determined having regard to the most cost-effective source of funding available as at the date of payment.
Return of capital
What is the capital component?
The distribution was entirely capital in nature. The Wesfarmers Dividend Investment Plan did not apply to the return of capital payment.
Why return capital this way?
This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. 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.
The return of capital demonstrated Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders.
What will happen to the number of shares I hold?
There was no share consolidation as part of this capital management initiative and the number of Wesfarmers shares held by shareholders was not affected by the return of capital.
Is there a dividend component?
There was no dividend component as part of this capital management initiative.
Shareholder information
Your shareholding
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.
The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021.
Any Wesfarmers shareholder who:
- sold their shares while the shares were trading on a ‘cum return of capital’ basis (i.e., before Wednesday, 17 November 2021); or
- purchased their shares after the shares started trading on an ‘ex return of capital’ basis (i.e., from Thursday, 18 November 2021 onwards),
did not receive the capital return.
Did I have the choice to participate in the capital return?
The return of capital was considered and approved by shareholders at the 2021 AGM. All registered shareholders on the record date received the capital return – there was not an opportunity for these shareholders to 'opt out' of the capital return. The record date for the return of capital was 4:00pm (Perth time) on Friday, 19 November 2021.
Any Wesfarmers shareholder who:
- sold their shares while the shares were trading on a ‘cum return of capital’ basis (i.e., before Wednesday, 17 November 2021); or
- purchased their shares after the shares started trading on an ‘ex return of capital’ basis (i.e., from Thursday, 18 November 2021 onwards),
did not receive the capital return.
How much did I receive and how was the payment made?
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. 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.
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).
Did the Dividend Investment Plan (DIP) apply?
The return of capital was not eligible to participate in the DIP.
Will my shares be worth less after the capital return?
Shares may have traded at a lower price from the ‘ex return of capital’ date than they otherwise would have done had the return of capital not occurred. This is due to the outflow of funds to shareholders.
Payment details
How and when will I be paid?
If you provided your direct credit payment instructions by 4:00pm (Perth time) on Friday, 19 November 2021, 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. Payments should have appeared in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. Payments made to credit unions may take longer.
Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021.
How do I provide, update or check my bank account details?
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. For enquiries, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631.
Tax implications
What are the shareholder tax implications of the capital return?
Please refer to the Wesfarmers Limited 2021 Shareholder Tax Information Guide or the ATO class ruling. The summary in these documents and in this section is general in nature and should not be relied upon as advice. In addition, the tax implications for each shareholder will depend on the circumstances of the particular shareholder. Accordingly, all shareholders are encouraged to seek their own professional advice in relation to their tax position. 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.
(i) Resident shareholders
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. Also:
- the cost base for each share acquired after 19 September 1985 should be reduced by the return of capital amount (on a cents per share basis) for the purpose of calculating any capital gain or capital loss on the ultimate disposal of that share; and
- 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. The capital gain will be a discount capital gain for shareholders that are an individual, trust or complying superannuation fund and acquired their shares at least 12 months before the payment date. The discount factor for resident individuals and trusts is one-half and for complying superannuation funds is one-third.
No capital gain or capital loss should arise in respect to a share acquired on or before 19 September 1985.
(ii) Non-resident shareholders
For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital.
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.
(iii) Employee shareholders who hold their shares within a Wesfarmers employee share plan
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:
- For participants in the Australian tax exempt share plans or the loan plans the cost base for each share held on behalf of employees should be reduced by the return of capital amount.
- For participants in all other Australian employee share plans, the tax implications are as follows:
- For shares that had not reached their ESS deferred taxing point at the time of the return of capital payment (i.e. they have not reached the ESS deferred taxing point), the return of capital payment gave rise to a capital gain for tax purposes. 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 discount factor for resident individuals is one-half.
- For shares that had reached a taxing point (i.e. shares held within the Deferred Plans at the time of the return of capital payment), the cost base for each share held on behalf of employees was reduced by the return of capital amount.
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.
For those employee shareholders who hold their shares within a New Zealand Wesfarmers employee share plan, are tax residents of New Zealand and only work in New Zealand, it is expected the return of capital payment will be treated as dividend income.
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.
How can I calculate my return of capital payment and when will I receive this payment?
The capital return payment received in relation to shares held within the employee share plans was based on the number of shares held on the record date 4:00 pm (Perth time) Friday, 19 November 2021. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share.
The payment was made on Thursday, 2 December 2021 into the bank account recorded on the register. If you have a New Zealand bank account, the exchange rate that was used to convert the Australian dollar payment into New Zealand dollars was set on the record date.
If you participated in the Loan Plans the payment for these shares was applied to each outstanding loan balance. 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.