Products & platforms

Westfield Group – restructure and merger with Westfield Retail Trust

Factsheet December 2014

Summary

On 30 June 2014, Westfield Group (WDC) created two new listed retail property stapled security groups, Westfield Corporation (WFD), in respect of its international business, and Scentre Group (SCG), in respect of its Australia and New Zealand business.

This fast fact is relevant to holders of WDC stapled securities only. A fast fact in respect of Westfield Retail Trust (WRT) stapled securityholders can be found here.

Prior to the corporate action, the WDC structure was as follows:

Following the corporate action, the WFD and SCG structure is as follows:

Structure of WFD stabled security:

Structure of SCG stapled security:

Allocation – each eligible WDC securityholder received 1.246 SCG stapled securities AND 1 WFD stapled security for every 1 WDC stapled security held as at record date

Cash received in CMA – nil

Record date – 27 June 2014

Implementation date – 30 June 2014

ATO class ruling – CR 2014/78

Demerger roll-over relief – choice available

Demerger dividend – $0.40 per WHL share. This amount is non-assessable, non-exempt and NOT received in cash.

Transfer of assets between certain trusts roll-over relief – trustees of WDC elected to apply

Cost base of each WFD stapled security

Cost base of each SCG stapled security – 

Where no E4 capital gain arises from the WT stapling distribution:

Where E4 capital gain arise from the WT stapling distribution:

Note: WAT, WHL and WT cost above refers to the respective cost base of each underlying security just before the corporate action.

Source: Westfield Group Securityholder Booklet, dated 14 April 2014 and Westfield Group Restructure Proposal, dated 5 June 2014

What is the structure of an initial investment in WDC?

WDC represents an investment in a stapled security. Each WDC stapled security comprised of an interest in the following underlying assets:

  • Westfield America Trust (WAT)
  • Westfield Holdings Limited (WHL)
  • Westfield Trust (WT)

What is the structure of the new investment in WFD and SCG?

WFD represents an investment in a stapled security, WFD stapled units.  Each WFD stapled security will comprise of an interest in the following underlying assets:

  • Westfield America Trust (WAT)
  • Westfield Corporation Limited (WCL)
  • WFD Trust (WFDT)

SCG represents an investment in a stapled security, SCG stapled units.  Each SCG stapled security will comprise of an interest in the following underlying assets:

  • Westfield Holdings Limited (WHL)
  • Westfield Trust (WT)
  • Westfield Retail Trust 1 (WRT1)
  • Westfield Retail Trust 2 (WRT2)

Whilst WFD stapled securities can only be traded on the ASX as a single instrument, for taxation purposes, an interest in a WFD stapled security will represent an interest in three separate capital gains tax (CGT) assets. 

Similarly, SCG stapled securities can only be traded on the ASX as a single instrument. For taxation purposes, an interest in a SCG stapled security will represent an interest in four separate CGT assets. 

Overview of the WDC corporate action

Stage 1 - Restructure

  1. WHL distributed the shares in WCL to WDC securityholders on the basis of one WCL share for each Original WHL share held (WCL demerger).
    • WHL distributed a return of capital of approximately $0.50 per WHL share, and
    • WHL distributed a demerger dividend of approximately $0.40 per WHL share.
  1. WT distributed the units in WFDT to WDC securityholders, equating to $0.00000004 per WT units, on the basis of one WFDT unit for each original WT unit held (WFDT distribution).
  2. The WCL shares and WFDT units were stapled to the original WHL shares, original WT units and WAT units.
  3. WT transferred assets to WFDT (WFDT asset transfer).

Stage 2 – De-stapling

  1. The WHL shares and WT units were de-stapled from the WCL shares, WFDT units and WAT units. This resulted in the formation of WFD.

Stage 3 - Merger

  1. Each original WHL share was converted into 1.246 converted WHL shares in line with the merger ratio (Capital conversion).
  2. Each original WT unit was converted into 1.246 converted WT units in line with the merger ratio (Capital conversion).
  3. WT made a capital distribution of $0.0011 per converted WT units which was applied to acquire:
    • One WRT1 unit for $0.001; and
    • One WRT2 unit for $0.0001

         for each converted WT unit held (WT stapling distribution).

  1. The converted WT units and converted WHL shares were then stapled to the WRT1 and WRT2 units to form SCG.

When is the implementation date?

30 June 2014.

What does a WDC securityholder hold after the implementation of the corporate action?

A WDC securityholder no longer holds their original investment in the WDC stapled securities after the implementation of the restructure.  Instead, for every 1 WDC stapled security held, a WDC securityholder now holds 1 WFD stapled security and 1.246 SCG stapled securities.

Fractional entitlements were rounded up to the nearest whole SCG stapled security.

How should the WCL demerger from WHL be treated for tax purposes for a WDC securityholder?

On implementation date, 30 June 2014, WHL reduced its share capital by way of an in specie distribution of WCL shares to WHL shareholders. As a result, a WDC securityholder received a return of capital of approximately $0.50 per WHL share.

CGT event G1 happened in relation to each of the WHL shares owned by a WDC securityholder on implementation date, 30 June 2014.

A WDC securityholder made capital gain from CGT event G1 to the extent the return of capital amount exceeds the WHL cost base. No capital loss can be made from CGT event G1. 

A G1 capital gain may be disregarded where:

  • WHL is a pre-CGT asset of the securityholder
  • The securityholder is a foreign resident
  • Demerger roll-over relief is applied

Is demerger roll-over relief available?

Yes. A WDC securityholder may choose demerger roll-over relief to apply where certain criteria are met.

A resident WDC securityholder can choose demerger roll-over relief for their pre-CGT and post-CGT WHL shares. A foreign resident cannot choose demerger roll-over relief.

What are the CGT consequences to a WDC securityholder applying demerger roll-over relief in respect of WHL and WCL?

A WDC securityholder who chooses demerger roll-over relief will be able to disregard any CGT event G1 capital gain made under the demerger.

The cost base of the securityholder’s original WHL shares must be apportioned over the WHL shares and the new WCL shares.

A reasonable method of apportionment accepted by the ATO of the original cost base of WHL shares, just before the demerger, is to attribute:

  • 26.3% of the cost base to the pre-converted WHL shares, and
  • 73.7% of the cost base to the WCL shares.

No other adjustments are made to the cost base and reduced cost base.

What are the CGT consequences to a WDC securityholder NOT applying demerger roll-over relief in respect of WHL and WCL?

A WDC securityholder who does not, or cannot, choose to apply demerger roll-over relief, cannot disregard any CGT event G1 capital gain arising under the demerger.

Any CGT event G1 capital gain may be reduced by the CGT discount, provided certain conditions have been satisfied. For resident individuals and trusts, the discount is 50%, and for complying superannuation funds, the discount is 33 1/3%.

Where the WDC securityholder owns a post-CGT WHL share, the cost base of their original WHL shares must also be apportioned over the WHL shares and the new WCL shares in the same manner had the demerger roll-over relief been applied, as outlined above.

Where the WDC securityholder owns a pre-CGT WHL share, the cost base of their new WCL shares will be acquired at market value on the implementation date.

What is the acquisition date of WCL shares for tax purposes?

Where demerger roll-over relief is chosen for a post-CGT WHL share, the acquisition date of the WCL share  received from the demerger will be taken to have been acquired by the WDC securityholder on the same day as their original WHL share.

Where demerger roll-over relief is not chosen for a pre-CGT WHL share, the acquisition date of the WCL share will be the taken to have been acquired by the WDC securityholder on the implementation date, 30 June 2014.

Summary of tax consequences of the distribution of WCL Shares by WHL (demerger)?

Where roll-over demerger relief is chosen:
  Pre-CGT Post-CGT
G1 Gain Disregarded Disregarded
WCL acquisition date Original acquisition date Original acquisition date
WCL cost base Apportioned Apportioned
Where roll-over demerger relief is not chosen:
  Pre-CGT Post-CGT
G1 Gain Disregarded Realised
WCL acquisition date 30 June 2014 Original acquisition date
WCL cost base MV on 30 June 2014 Apportioned

How will the demerger dividend amount be treated for tax purposes for a WDC securityholder?

As part of the WCL demerger, WHL shareholders also received a non-cash demerger dividend amount. This dividend will be treated as non-assessable, non-exempt income to the shareholder. Therefore, the demerger dividend will not form part of a WHL shareholder's assessable income.

The demerger dividend amount was approximately $0.40 per WHL share held.

How should the WT distribution be treated for taxes for a WDC securityholder

WT made an in-specie distribution, as a return of capital, of WFDT units to WT unitholders equating to $0.00000004 per WT unit.

CGT event E4 happened to each WT unit owned by a WDC securityholder on implementation date, 30 June 2014.

A WDC securityholder made a CGT event E4 capital gain to the extent the return of capital amount exceeds the WT cost base. No capital loss can be made from CGT event E4. 

E4 capital gains can be disregarded where:

  • WT is a pre-CGT asset of the securityholder
  • The securityholder is a foreign resident
  • Subdivision 126-G roll-over relief is applied.

After the in-specie distribution of WFDT units, WT transferred certain assets to WFDT.

Is roll-over relief available for the transfer of assets between certain trusts?

Yes. The trustees of WT and WFDT have elected to apply Subdivision 126-G roll-over with respect to the transfer of relevant Shopping Centre interests by WT to WFDT. Therefore, this choice has been made on behalf of all WDC securityholders.

What are the CGT consequences to a WDC securityholder of applying roll-over relief in respect of the transfer of assets between certain trusts for WT and WFDT?

The cost base of the securityholder’s original WT units must be apportioned over the WT units and the new WFDT units.

A reasonable method of apportionment of the cost bases and reduced cost bases of the WT units, just before the implementation date, is to attribute:

  • 46.7% of the cost base to the pre-converted WT units, and
  • 53.3% of the cost base to the WFDT units.

No other adjustments are made to the cost base and reduced cost base.

What is the acquisition date of WFDT units?

Generally, WFDT units will be taken to have been acquired by a WDC securityholder on the implementation date, 30 June 2014. Where a WDC Securityholder owns pre-CGT WT units, the WFDT units be been taken to have been acquired on the same day as their original WT units.

However, for CGT discount purposes, WFDT units will be taken to have been acquired by a WDC securityholder on the on the same day as their original WT units.  This applies to both pre-CGT and post-CGT WT units.

How will the de-stapling of WHL and WT from WDC be treated for tax purposes for a WDC securityholder?

The de-stapling of WHL and WT from WDC Group and from each other will not give rise to a CGT event.

How will the conversion of WHL shares and WT units be treated for tax purposes for a WDC securityholder?

The conversion of shares in WHL and units in WT does not give rise to a CGT event.

The total cost and total reduced cost at a parcel level of the converted shares and units will equal the corresponding cost and reduced cost of the original shares and units at a parcel level. The cost base per share and base cost per unit will decrease. There were no changes to the acquisition date.

How will the WT stapling distribution be treated for tax purposes for a WDC securityholder?

WT paid a further capital distribution of $0.0011 per converted WT unit.

CGT event E4 happened to each WT unit owned by a WDC securityholder on implementation date, 30 June 2014.

A WDC securityholder will make an E4 capital gain to the extent the return of capital amount exceeds the WT cost base. No capital loss can be made from CGT event E4. 

E4 capital gains can be disregarded where:

  • WT is a pre-CGT asset of a resident securityholder
  • The securityholder is a foreign resident.

What are the cost bases and reduced cost bases of WRT1 units and WRT2 units?

The cost base and reduced cost base of the units in WRT1 and WRT2 are as follows:

  • WRT1 unit acquired under the Stapling Arrangement is $0.001 per unit, and
  • WRT2 unit acquired under the Stapling Arrangement is $0.0001 per unit.

The acquisition date of WRT1 units and WRT2 units will be the implementation date, 30 June 2014.

What are the CGT consequences of stapling events?

No CGT event will arise as a result of the stapling of WT units, WHL shares, WRT1 units and WRT2 units.

How does a WDC securityholder calculate their cost base of each stapled security WFD after the restructure?

The cost base of each WFD stapled security after the restructure will be:

Note: WAT, WHL and WT cost above refers to the respective cost base of each underlying security just before the corporate action.

How does a WDC securityholder calculate their cost base of each SCG stapled security after the restructure?

The cost base of each SCG stapled security after the restructure will be:

Where no E4 capital gain arises from the WT stapling distribution:

Where E4 capital gain arise from the WT stapling distribution:

Note: WAT, WHL and WT cost above refers to the respective cost base of each underlying security just before the corporate action.

Has the ATO issued any rulings relating to the restructure?

On 1 October 2014, the ATO released the following Class Ruling confirming the tax treatment for WDC securityholders:

  • CR 2014/78: Westfield Group – Restructure and Merger with the Westfield Retail Trust

Example

Assume you acquired 1,000 WDC stapled securities for $10.00 each (including incidental costs) on 1 March 2014.

Based on the relative net tangible assets as at 31 December 2013, the cost base of each component of each WDC stapled security is set out below:

  • WHL share $1.07 (10.7%)
  • WT unit $7.19 (71.88%)
  • WAT unit $1.74 (17.42%)

As part of the WCL demerger, you received 1,000 WCL shares.

As part of the WFDT distribution, you received 1,000 WFDT units.

Your 1,000 original WHL shares were converted into 1,246 converted WHL shares

Your 1,000 original WT units were converted into 1,246 converted WT units.

You were entitled to the WT stapling distribution of $1.37 (1,246 x $0.0011) and accordingly you received 1,246 WRT1 units and 1,246 WRT2 units on 30 June 2014.

Note: For capital gains tax purposes you need to apportion the cost of each stapled security and the proceeds on sale of each stapled security over the separate assets that make up the stapled security. This apportionment should be done on a reasonable basis. One possible method of apportionment is on the basis of the relative net tangible assets of the individual entities. For more information, please see link.

Cost base in SCG stapled securities:

The cost base of your Converted WHL share is:

  In total Per share
Cost base – original WHL Shares $1,070.00 $1.07
($1,070.00 / 1,000 shares)
Cost base split as part of WCL demerger – 26.3% $281.41 $0.281
($281.41 / 1,000 shares)
Cost base – converted WHL shares $281.41 $0.226
($281.41 / 1,246 shares)
CGT date of acquisition of converted WHL shares is 1 March 2014
The cost base of your Converted WT units is:
  In total Per share
Cost base – original WT units $7,188.00 $7.188
($7,188.00 / 1,000 shares)
Cost base split as part of WFDT asset transfer – 46.7% $3,356.80 $3.357
($3,356.80 / 1,000 shares)
Cost base – converted WT units $3,356.80 $2.694
($3,356.80 / 1,246 shares)
Less: WT stapling distribution ($1.37) ($0.0011)
Cost base – converted WT units $3,355.43 $2.693
($3,355.43 / 1,246 shares)
CGT date of acquisition of converted WT units is 1 March 2014
 The cost base of your WRT1 units is:
  In total Per unit
Cost base – WRT1 units $1.25
($0.001 x 1,246 shares)
$0.001
CGT date of acquisition of converted WRT1 units is  30 June 2014
The cost base of your WRT2 units is:
  In total Per unit
Cost base – WRT2 units $0.13
($0.0001 x 1,246 shares)
$0.0001
CGT date of acquisition of converted WRT1 units is  30 June 2014
The total cost base of your SCG securities is:
  In total Per security
Cost base – SCG securities $3,638.21
($281.41+$3,355.43+$1.25+$0.13)
$2.920
($3,638.21 / 1,246 securities)

Cost base in WFD stapled securities:

The cost base of your WAT units is:

  In total Per unit
Cost base – WAT units $1,742.00 $1.742
($1,742.00 / 1,000 units)
CGT date of acquisition of WAT units is 1 March 2014
The cost base of your WCL shares is:
  In total Per share
Cost base – original WHL Shares $1,070.00 $1.07
($1,070.00 / 1,000 shares)
Cost base split as part of WCL demerger – 73.7% $788.59 $0.789
($788.59 / 1,000 shares)
CGT date of acquisition of  WCL shares is 1 March 2014
The cost base of your WFDT units is:
  In total Per share
Cost base – original WT units $7,188.00 $7.188
($7,188.00 / 1,000 shares)
Cost base split as part of WFDT asset transfer – 53.3% $3,381.29 $3.831
($3,381.29 / 1,000 shares)
CGT date of acquisition of  WFDT units is 1 March 2014
The total cost base of your WFD stapled securities is:
  In total Per security
Cost base – WFD securities $6,361.79
($1,742.00+$788.59+$3,381.29)
$6.362
($6,361.79 / 1,000 securities)
Source: Westfield Group Securityholder – how to determine your cost base in Scentre Group stapled securities and Westfield Corporation stapled securities.

How is the restructure reported by Wrap?

General assumptions:

  • Investors are Australian residents for income tax purposes
  • Investors hold (will hold) their WDC, WFD and SCG stapled securities on capital account for income tax purposes
  • An investor is eligible for demerger roll-over relief on their WHL shares when the investor has made a notional capital gain from the in-specie distribution of WCL shares.
  • The cost base and reduced cost base of WHL and WCL were calculated based on the reasonable apportionment given in CR 2014/78.
  • The cost base and reduced cost base of WT and WFDT were calculated based on the reasonable apportionment given in CR 2014/78.
  • The cost base of each underlying asset of the WDC stapled security has been calculated with respect of the acquisition date of WDC and the net tangible asset (NTA) apportionment provided by Westfield Group. The cost base of each underlying asset has been adjusted for:
    • any tax deferred distributions paid in respect of the underlying security, and
    • WRT de-stapling event from WDC in December 2010.

Capital reduction amount:

Wrap has applied demerger roll-over relief in respect of the WCL demerger where possible. As such, any capital gain arising from CGT event G1 will be disregarded.

Wrap has reported any E4 capital gain arising from the WT stapling distribution in an investor’s Realised Gains Report.

Demerger dividend amount:

Wrap will not show the non-assessable, non-exempt demerger dividend amount of $0.40 per WHL share held in the Wrap Tax Reports. This amount was not received in cash and is not included in the investor’s assessable income.

Each stapled security:

Every one WDC stapled security held was converted to 1 WDC stapled security AND 1.246 SCG stapled securities. Where a fraction existed, this was rounded up to the nearest whole stapled security.

The Wrap Reports will reflect the consolidated position of the WFD and SCG stapled securities at the staple level, rather than reflecting the position of WHL, WT, WCL, WFDT, WRT1 and WRT2 at the individual level. We recommend investors seek their own independent tax advice to determine the appropriate treatment of the WFD and SCG stapled securities specific to their individual circumstances.

Cost base/reduced cost base of each WFD and SCG stapled security:

Wrap has apportioned the WDC cost base and reduced cost base just before the restructure between WFD and SCG.

The cost base of each WFD stapled security was calculated as follows:

The cost base of each SCG stapled security was calculated as follows:

Where no E4 capital gain arises from the WT stapling distribution:

Where E4 capital gain arise from the WT stapling distribution: 

Note: WAT, WHL and WT cost above refers to the respective cost base of each underlying security just before the corporate action.

A WDC securityholder was issued 1 new WFD stapled security and 1.246 new SCG stapled securities for every 1 WDC stapled security held on record date. Fractional entitlements were rounded up to the nearest whole SCG stapled security. At the completion of the restructure, securityholder no longer own any interests in WDC.

Acquisition date of WFD and SCG:

Wrap has shown WFD and SCG stapled securities as acquired on the same date the WDC securityholder acquired their original WDC stapled security.

Please note, due to system limitations and reporting only available on a consolidated WFD and SCG stapled level, multiple acquisition dates cannot be reported on the same asset code. This should be taken into consideration on the ultimate disposal of WFD or SCG.

Fast facts

2015 Corporate Actions

2014 Corporate Actions

2013 Corporate Actions

2012 Corporate Actions

Non-resident tax issues

Tax administration issues

CGT issues

Specific tax entities

Miscellaneous tax issues