woolworths demerger tax implications

I'm trying to track the performance of my WOW and new EDV shares, partially to help with capital gains tax etc etc. This condition requires issuance of shares. Woolworths shareholders then received one unit in SCA Property Group for every five Woolworths shares held. 29. A question that arises is whether the cost of shares held by holding company in the subsidiary company continues or does it reduce on account of above provisions. The ATO is expected to publish the ruling in early August 2021. In this case as no shares are issued, the applicability of the Section fails, and the original cost remains protected in the hands of the shareholders of the demerged subsidiary company. (iii) Cost of acquisition of shares of resulting company. Dividend amount of 1,000 $0.14195442 = $141.95, Capital return amount of 1,000 $0.14598558 = $145.98, Capital proceeds of $1.6248918 ($1.6347 99.4%), Total capital gain $38.766 ($0.19383 200 units), Capital proceeds of $0.0098082 ($1.6347 0.6%), Total capital gain $0.234 ($0.00117 200 units), Less cost base of $23,000.00 + 100.00 = $23,100.00, Dividend amount of 2,000 $0.14195442 = $283.90, Capital return amount of 2,000 $0.14598558 = $291.97, Capital proceeds of 400 $1.4397 = $575.88, Capital gain on the sale of her Woolworths shares of $35,700, Capital gain on the ending of the right to receive stapled securities = $291.98, Less prior year net capital loss of $50.00 = $35,941.98, Stacey now applies the 50% CGT discount $35,941.98 50% = $17,970.99, SCA Property Retail Trust units = $1.4310618, SCA Property Management Trust units = $0.0086382. Stacey acquired 2,000 Woolworths shares in 2002 and worked out their total cost base including brokerage was $23,000.00, or $11.50 each. What does this all mean for tracking the performance re. Because the cost base of the right to receive the stapled securities is nil, the capital proceeds (your total distribution amount) is your capital gain. However, significant amendments have been enacted by the Finance Act, 2021 (FA 2021) in this regard. I have a few questions, if anyone is happen to share what they know it would be much appreciated. The Company, following confirmation from the ATO, advises that the approved apportionment is 75% for Woolworths and 25% for Endeavour. The Central Board of Direct Taxes (CBDT). Have, If you think about the biggest obstacle to healthy eating, it usually comes down to time. compared to 4.1% in FY17. 6 Cost Base Reduction: This should auto populate. Pendency means the period between the date of filing of application with prescribed authority and receipt of such order by the specified tax authorities. The Act [69] with effect from 1 April 2018 has been amended to widen the scope of the term accumulated profits, which provides that in the hands of the amalgamated company, accumulated profits or loss shall be increased by the accumulated profits of the amalgamating company, whether capitalized or not, on the date of amalgamation. to make a short-term or one-off commercial gain. olY I Y@G. The transfer of the undertaking is on a going concern basis; and. Paul Rickard is a co-founder of the Switzer Report. After the resolution is approved, the demerger will be implemented on 1 July. Note: You will not be taxed twice on the dividend amount. 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. The amendment in section 43(6) requires the assessee to exclude the standalone WDV of goodwill (calculated as difference between actual cost of goodwill and depreciation allowable on such goodwill till 31 March 2020) from the block of intangibles. 5P (LXXVI-63) of 1967, dated 9 October 1967. When consideration is given in the form of shares to some shareholders and cash is paid to the balance shareholders, benefit of exemption is available only to those shareholders who have received consideration in the form of shares of the transferee company. The restructure involved a distribution under which you received one stapled unit in Shopping Centres Australasia Property Group (SCA Property Group) for every five Woolworths shares you owned on 30November 2012 (Distribution). This will strengthen the view that value of other intangibles appearing in the block needs to be separated from the value of goodwill pursuant to the amendment. The only advantage of doing this is the saving on brokerage which on a tiny parcel of shares, could be considerable. $0.0084 for each SCA Property Management Trust unit. Demergers and taxoverview. Will you need the Individual tax return instructions supplement? (d) Key income tax implication for the shareholders of demerged company. For. You have the same number of parcels of EDV as you do WOW each with their own acquisition dates and costbases as per 1 & 2 above. 2 - Click 'Enter a new Trade or Adjustment'. An issue that may ariseis whether such reduction of reserves results in deemed dividend implications under Section 2(22) of the Act especially if the resulting company is a shareholder of the demerged company. The capital return amount was $0.7299279 for every five Woolworths shares you owned on 30November 2012. The demerger of a company simply means splitting of company into two or more parts. When there is demerger of a business undertaking by a subsidiary company to its holding company, the holding company cannot issue shares to itself. As part of the demerger, undertaking of the demerged company (which includes accumulated profits) is transferred to the resulting company entailing a reduction in its reserves. Woolworths Group also has the largest number of team members participating in a share plan in both Australian and New Zealand markets following the launch of the Better Together Recognition Award in 2020. Related articles Woolworths Group Limited (WOW) demerger of Endeavour Group Limited (EDV) - June 2021 Your Woolworths Limited in-specie distribution advice will tell you these amounts. Section 72A(2) of the Act read with Rule 9C of the Income-tax Rules, 1962. Determination of the cost base is of relevance to the shareholder for the purpose of subsequent sale of shares of the resulting company. Paul Rickard explains the demerger specifics and how itll impact shareholders. Step 2a: The adjusted cost base of each of Nevilles 800 Woolworths shares is: Step 2b: The adjusted cost base of each of Nevilles 200 Woolworths shares is: Step 3: Because Neville received less than 318 stapled securities (worth less than $500) he was sent the offer to have them sold in the sale facility at no cost to him. The market will tell us on 24 June when Endeavour Group shares start trading on the ASX. Income tax implications may arise on overseas demerger, if the transferor foreign company owns shares of an Indian company (directly or indirectly). Although you received units in SCA Property Management Trust and SCA Property Retail Trust and not cash, for tax purposes you received from Woolworths both: The dividend amount was $0.7097721 for every five Woolworths shares you owned on 30November 2012. 286 531This material is intended to provide general advice only. Coles was $17.93. D. Under Section 47 (vii), the provisions of Section 45 do not apply to a transfer in a demerger of a capital asset by the demerged company to a resulting company if the resulting company is an Indian company. $1.6248918 for each SCA Property Retail Trust unit, and. Neville therefore made a total capital gain of $39 on the sale of his stapled securities in the sale facility. You must however reduce the cost base of your Woolworths shares by the capital return amount. Neville cannot apply the 50% discount to this capital gain because he did not hold the stapled securities for more than 12 months. The firm said that the demerger reflects the companies' vision to "create two simpler, more focused independent businesses that are better equipped for future growth." Under the terms of the deal, eligible Woolworths Group shareholders obtained one Endeavour Group share for each share of Woolworths Group they held during the record date . for disallowing depreciation pertaining to goodwill from the quantum of unabsorbed depreciation, the amount of unabsorbed depreciation need not be disturbed and should be allowed to be set-off in full. If you subsequently sell your Endeavour shares, then you may have to pay capital gains tax. The effects of amalgamation / demerger apply from the appointed date as mentioned in the scheme approved by NCLT [75] . Depending upon the level of PPA undertaken in the past and disclosures around such intangibles in the block of assets, a taxpayer would need to explore whether reallocation of higher amounts to non-goodwill intangibles (such as trademarks, license, customer contracts, knowhow, distribution network, etc) is possible. The shareholders of the demerged company, under the scheme of demerger, would receive shares in the resulting company. Using an NPAT split of 80% and 20%, and a current Woolworths share price of $42.00, this would imply a split post demerger of a new Woolworths share being worth $33.60 and an Endeavour Share being worth $8.40. Section 2 (19AA) of the Income Tax Act,1961 defines demerger as a transfer of undertakings (one or more) to any resulting organisation pursuant to an arrangement scheme under Sections 391 to 394 of the Companies Act, 1956 in such a way that:. Basis language of the aforesaid amendment in Explanation 2A to Section 2(22), a plausible interpretation is that amendment applies only in the case of amalgamation and not to a demerger. It expects a $220 million gain on its equity interest in Quantium, with transaction costs ($69 . Everyone loves the silky smooth feeling of a fresh shave, but the actual process of maintaining it can be tedious and time-consuming. Dependant on approvals, Endeavour Group will be formed from the merger of Endeavour Drinks, Woolworths' alcohol retail arm, and the ALH Group . In particular, the dependence on poker machines means that Endeavour will be off the buy list for some fund managers, while other existing holders will use the demerger to exit Endeavour now that they can. at the Dividends label in your 2012-13 tax return. 85.81% of the total cost bases of your Woolworths Group shares just before the demerger to your Woolworths Group shares, and. If you make a capital loss when you dispose of your shares, you need to calculate the reduced cost base instead of the cost base. Neville still owns all of his 1,000 Woolworths shares. 15 Input Quantity: 1 Endeavour share to every 1 Woolworths share. However, the $4.76 decline in its share price was more than offset by the $6. My Woolworths shares meant I gained 550 Endeavour shares and these were sold in the Sale facility. The resulting demerger will create two independent ASX-listed companies with . As per the Act [44] , the WDV of the block of assets acquired by resulting company should be the tax WDV of such assets in the hands of demerged company immediately before the demerger. . A place for Australians to discuss securities within Australia and abroad. Blacks Law Dictionary (7, The term amalgamate according to Oxford Advanced Learners Dictionary (8th edition 2010), means to put two or more things together so that they form one. It was shocking, Cereal is really the unsung hero of breakfast. Step 2: Neville must reduce the cost base of each of his Woolworths shares by the capital return amount of $0.14598558 for each share for which he received a SCA Property Group stapled security. Participants are advised to refer to all announcements by Woolworths for information, updates, and full timetables for the proposed transaction. In FY 20, on total revenue of $63.7bn, Endeavour Group contributed $10.6bn to the Woolworths Group or 17%. Say you did the calculation and found out the numbers.But you bought shares in both . D. Insertion of Rule 8AC for computation of STCG and WDV. // -->