Related articles Woolworths Group Limited (WOW) demerger of Endeavour Group Limited (EDV) - June 2021 As mentioned earlier, in the year of demerger, aggregate annual depreciation in respect of depreciable assets (not being goodwill of a business or profession) that are transferred by the demerged company to the resulting company is required to be apportioned between the demerged company and resulting company in the ratio of the number of days of usage of those assets by the demerged and resulting company. Australian Taxation Office for the Commonwealth of Australia. For Stacey, the distribution has the following components: The franking credit attached to the Dividend amount is: Step 2: Stacey has to work out the capital gain on the ending of the right to receive the SCA Property Group stapled securities. In exercise of the powers conferred by the aforementioned proviso to section 50(2) of the Act, the CBDT vide Notification No. 29. (d) Key income tax implication for the shareholders of demerged company. Woolworths Group is proud to have over 350,000 shareholders, the vast majority of whom are Australian retail investors. It takes a while for buyers to recognise the value, and as the management team starts to perform, the share price rises. The market will tell us on 24 June when Endeavour Group shares start trading on the ASX. In the context of amalgamation, the said amendmentsuggest that where goodwill forms part of block of assets (of the amalgamated company) as on 1 April 2020 and the depreciation thereon has been claimed by the amalgamated company, then the written down value of such block of asset and the short-term capital gains (if any) upon transfer need to be determined in the prescribed manner [64] . Using the ruling apportionment (point 16 in the ruling) results in Cost base of EDV shares as 10000* 14.19% = $1419. No stamp duty on the basis that the demerger is across the board. Paul Rickard explains the demerger specifics and how itll impact shareholders. Assuming that tax demerger relief is obtained, there shouldn't be any tax implications for Australian resident shareholders from the demerger per se. D. Insertion of Rule 8AC for computation of STCG and WDV. This appears odd as Woolworth's does have a tax ruling and it could apply in other cases in the future. A restructure of Woolworths was implemented on 11December 2012. [61]. When the Endeavour Group demerger move was first announced in mid-2019, Woolworths CEO Brad Banducci told ABC's The Business that 7% or "a bit less than" $700 million of Endeavour Group's total revenue was from poker machines, based on 2017-18 figures. The demerger relief rules are intended to allow relevant investors optional Capital Gains Tax (CGT) rollover relief and provide dividend exemptions. My Woolworths shares meant I gained 550 Endeavour shares and these were sold in the Sale facility. In order to have personal tax or finance questions answered, you will need to seek the services of a licensed practitioner who will be qualified to answer your queries. Any compromise or arrangement is defined under the Companies Act 2013, however, the said act is silent on demerger.Hence, the general meaning of demerger of the company can be termed as a kind of corporate restructuring whereby the company decides to part with one of its business activities to operate it under . A demerger, as defined in section 125-70, happened to the Woolworths demerger group, which included Woolworths and Endeavour. Section 47(vicc) read with Explanation 5 to Section 9(1)(i) of the Act. This means that your cost base for Woolworths now becomes $22.50 (75% of $30.00), and your cost base for your Endeavour shares is $7.50 each (25% of $30.00). Further, the Finance Act, 2021 has also made an amendment to section 55(2)(a) of the Act in relation to determination of cost of acquisition of certain intangible assets, including goodwill. Property means capital assets in the form of immoveable property being land or building or both, shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures, any work of art or bullion and virtual digital asset. 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. Availability of MAT [65] [65]credit of transferor company. This value is apportioned 99.4% to the SCA Property Retail Trust unit and 0.6% to the SCA Property Management Trust unit, giving their separate cost base of: For tax purposes you acquired the stapled securities on 11December 2012. I read a NAB article which suggested that I would be deemed to have acquired the EDV shares on the same that I acquired the WOW shares. (ii) Period of holding of shares received in resulting company. An argument can also be put forth that since depreciation on goodwill is not allowable on account of the amendment, it becomes imperative to carve out goodwill from other intangibles which as a matter of practice may have been clubbed in a common basket and termed as goodwill in the financial statements. Explanation 2A to Section 2(22) of the Act, Circular No. You must however reduce the cost base of your Woolworths shares by the capital return amount. Finance Act, 2022 has introduced new provisions to enable the successor company to file modifies return, in prescribed manner, within 6 months from the end of the month in which NCLT order is issued. For many people, it only takes one missed shave to result in the appearance of prickles and stubble! For income players, Coles is forecast to pay a higher dividend of 3.4% (fully franked) compared to Woolworths 2.8% (fully franked). There is also a capital reduction resolution (this is also a formality, and wont have any impact for Woolworths shareholders taking demerger tax relief ). Explanation 2 to section 43(6), Explanation 7 to section 43(1) of the Act. On 2 August 2022, the Federal Court of Australia approved the settlement and Maurice Blackburn was appointed as Administrator of the Settlement . For Neville, the distribution has the following components: The franking credit attached to the dividend amount is: Step 1: Neville includes the dividend amount of $141.95 and the franking credit amount of $60.83 at the dividend label of his 201213 tax return (along with any other dividends and franking credits he receives from Woolworths or other companies in which he owns shares). The User ID or Password entered is incorrect. You apportion your pre-demerger WOW cost base 85.81% to your post-demerger WOW shares and 14.19% to your EDV. Several subsequent judicial precedents which have relied upon the aforesaid SC decision and granted the benefit of depreciation on goodwill to the taxpayer. You made a capital gain if the sale proceeds were more than the cost base of the stapled securities. It is a settled position that the pre-requisite to create a charge of income under the head capital gain is that there has to be a transfer of an asset. 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. Demerger Relief by John Gonsalves, Ernst & Young Released November 2002. Is this the case? The stapled securities were sold for $1.6347 each and the sale proceeds sent to you. The resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis, except where the resulting company itself is a shareholder of the demerged company; The shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) becomes shareholders of the resulting company or companies by virtue of the demerger, otherwise than as a result of the acquisition of property or assets of the demerged company or any undertaking thereof by the resulting company. Coles was $17.93. This was completed in February 2020 and Woolworths' intention was to pursue a separation of Endeavour Group from Woolworths Group. Because each stapled security is made up of one unit in SCA Property Management Trust and one unit in SCA Property Retail Trust, the sale proceeds are apportioned 99.4% to the SCA Property Retail Trust unit and 0.6% to the SCA Property Management Trust unit, giving separate sale proceeds of: The cost base of the units is apportioned the same way. Even in this case, a plausible interpretation is that if entirety ofthe business is transferred to the resulting company, such that the demerged company is unable to continue the transferred business and continuity of business is preserved in the hands of the transferee companythere may be succession of business.The issue is however litigative and in absence of clarity on the issue it is important to review judicial developments on the subject when matter is being evaluated. When you have worked out the cost base for each of your Woolworths shares, subtract $0.14598558. 04 Woolworths & Endeavour Drinks - what you need to know and do Endeavour demerger by Paul Rickard 08 Five $5 stocks Five $5 stocks . Some were via DRP, and some were bought outright via broker. Further, it also explained that considering the nature of Goodwill, there is a little justification for depreciation on goodwill. E. Under Section 50-B, capital gains arising from slump sales are chargeable to tax. Woolworths shareholders will be entitled to receive one share in Endeavour Group for each Woolworths share held on Friday, 25 June 2021. General Anti Avoidance Rules (GAAR) [70] introduced w.e.f. It was shocking, Cereal is really the unsung hero of breakfast. Youd be hard-pressed to find a more delicious, filling breakfast that can go from pantry to mouth in less time. In addition dividends also have to be recorded against Endeavour for the Sept 2021 dividend. // -->