Factsheet March 2013
Allocation - 1 stapled unit in Shopping Centres Australasia Property Group (SCP) for every 5 shares held in Woolworths Limited (WOW), rounded down to the nearest number of SCP stapled units.
Cost base of SCP - $1.4397 per stapled unit.
Dividend amount - 49.3% of SCP stapled unit. Equal to 70.97721 cents per SCP stapled unit.
Capital return amount - 50.7% of SCP stapled unit. Equal to 72.99279 cents per SCP stapled unit.
Cash received in CMA – Nil. Dividend and capital return amounts paid as an in-specie distribution of property (the SCP stapled units).
Acquisition date of SCP - 11 December 2012.
Impact on WOW shares – Total cost base reduced by 72.99279 cents for every SCP stapled unit received.
An initial investment in WOW represented an investment in fully paid ordinary shares in WOW.
In October 2012 WOW proposed a capital reduction via an in-specie distribution to WOW shareholders. As part of the capital reduction, WOW Shareholders received stapled units in SCP, a newly established Real Estate Investment Trust (REIT).
Source: Woolworths Limited Explanatory Memorandum dated 5 October 2012.
An investment in SCP represented an investment in a stapled security, SCP stapled units. Each SCP stapled unit comprised of an interest in the following underlying assets:
Whilst SCP stapled units can only be traded on the ASX as a single instrument, for taxation purposes an interest in an SCP stapled unit represented an interest in two separate capital gains tax (CGT) assets.
WOW shareholders received an in-specie distribution of SCP stapled units. The distribution ratio was one SCP stapled unit for every five WOW shares held on the distribution record date. The transaction was treated as WOW:
for every five WOW shares held. Any fractional entitlement was rounded down to the nearest number of SCP stapled units. The market value of the SCP stapled units was $1.4397 per stapled unit (which is used for the above calculation).
The return of capital was made to all shareholders holding ordinary shares on the record date.
WOW investors continue to hold their original investment in the WOW shares. However, the in-specie distribution will affect the cost base of the WOW shares (explained below).
WOW investors will also hold an interest in a new stapled security, SCP stapled units, which includes interests in SMT and SRT.
The dividend amount is fully franked and accordingly, should be included in the assessable income of a resident shareholder, along with any franking credits attached.
The dividend amount was 70.97721 cents per stapled unit received. This equates to a dividend of 14.195442 cents in respect of each WOW share for which a shareholder received SCP stapled units.
The capital return amount was 72.99279 cents per stapled unit received. This equates to a cost base reduction of 14.598558 cents for each WOW share which a shareholder received SCP stapled units, but not below nil (note, fractional entitlements were rounded down). This will increase any capital gain upon the ultimate disposal of the WOW shares.
CGT event G1 may occur when a shareholder holds WOW shares on the record date and continues to own the shares on the payment date. Where the amount of the capital return exceeds the shareholder’s cost base, a shareholder will make a capital gain equal to the excess.
Any CGT event G1 capital gain may be reduced by the CGT discount, provided certain conditions have been satisfied. For individuals and trusts the discount is 50% and for superannuation funds the discount is 33 1/3%.
CGT event C2 may occur where the shareholder holds the shares at record date but sells or ceases to hold the shares prior to the payment date.
Where this occurs, the right to receive the in-specie distribution becomes a separate CGT asset in itself. The acquisition date of this CGT asset will be the date of acquisition of the original WOW shares. The cost base of the new asset will generally be nil. The new asset will be disposed of on payment date when the in-specie distribution is made. The capital proceeds will be the market value of the SCP stapled units on payment date ($1.4397 per SCP stapled unit).
A capital gain will arise if the capital proceeds from the ending of the right exceed the cost base. The capital gain will be equal to the excess.
Any capital gain made as a result of CGT event C2 will be reduced by the amount of the dividend component of the distribution that is included in the taxpayer’s assessable income.
Any CGT event C2 capital gain may be reduced by the CGT discount, provided certain conditions have been satisfied. For individuals and trusts the discount is 50% and for superannuation funds the discount is 33 1/3%.
On future sale, the first element of the cost base or reduced cost base for each SCP stapled unit will be equal to the market value of the stapled unit at the time of distribution (that is $1.4397).
For CGT purposes the units in SMT and SRT will be separate CGT assets, hence the market value of each SCP stapled unit will need to be apportioned between each individual unit on a reasonable basis, having regard to the net asset values of each trust on the date the distribution was made (11 December 2012).
A non-resident shareholder of WOW shares will be able to disregard any CGT event G1 or CGT event C2 capital gain that arises, as their investment in WOW is unlikely to constitute taxable Australian real property (TARP).
Where the dividend component paid is fully franked, non-resident shareholders will not be subject to dividend withholding tax. Non-resident shareholders are also not entitled to claim a tax offset for any franking credits received.
The ATO has issued Class Ruling CR 2012/121 Woolworths Limited – creating a new stapled security relating to the in-specie distribution, which was released on 19 December 2012.
Return of capital amount
Wrap processed a portion (50.7%) of the distribution as a return of capital on 11 December 2012, representing the capital return amount. This amount was 72.99279 cents per SCP stapled unit. One fifth of the capital return amount (14.598558 cents) was applied to reduce the cost base of each WOW share for which a shareholder received SCP stapled units. Wrap has reported any resulting G1 capital gain in an investor’s Realised Gains Report.
Wrap processed a portion (49.3%) of the distribution as a fully franked dividend on 11 December 2012. The dividend amount was 70.97721 cents per SCP stapled unit received. This equates to 14.195442 cents in respect of each WOW share for which a shareholder received SCP stapled units.
C2 capital gain
Where a client holds WOW shares on record date but sells the WOW shares before payment date Wrap has processed the acquisition of a new CGT asset, being the right to receive the in-specie distribution. The acquisition date of the new CGT asset has been processed as the original date of acquisition of the underlying WOW shares. The cost base for the new CGT asset (being the right to receive the distribution) is nil. The new CGT assets were disposed of for the distribution amount on payment date, 11 December 2012. The capital proceeds are the market value of the distribution, in this case $1.4397 per stapled units received. The CGT event C2 capital gain arising is processed as the difference between the capital proceeds received and the nil cost base. The capital gain should be reduced by the dividend component of the distribution. Wrap has processed any resulting C2 capital gain in an investor’s Realised Gains Report.
Each stapled unit
The Wrap Reports will reflect the consolidated position of the SCP stapled units at the staple level, rather than reflecting the position of the units in SMT and SRT at the individual level.