Notice of Rulings

Overview

The Commissioner of Taxation, Chris Jordan, has issued two rulings, CR 2018/59 and CR 2018/60, which provide clarity on the tax implications surrounding the demerger of Coles Group Limited from Wesfarmers Limited. These rulings were enacted in 2018 and are designed to address the specific tax issues arising from this corporate restructuring. They ensure that taxpayers understand their obligations and entitlements in relation to this significant corporate event, providing a clear framework for both Wesfarmers Limited and Coles Group Limited as they operate independently. These rulings aim to facilitate compliance and reduce disputes by offering definitive guidance on the tax treatment of the demerger, thereby supporting the policy objective of maintaining a fair and efficient tax system.

Scope and Application

The Commissioner of Taxation's Rulings, specifically CR 2018/59 and CR 2018/60, pertain to the income tax implications arising from the demerger of Coles Group Limited from Wesfarmers Limited. These Rulings are applicable to shareholders of Wesfarmers Limited and to both Wesfarmers Limited and Coles Group Limited concerning their respective employee share schemes. The Rulings are effective from 1 July 2018 to 30 June 2019, but they also extend to apply to entities within the specified class that entered into the relevant schemes during the term of the Rulings. This means that even after the initial specified period, the Rulings will continue to apply to those entities that were involved in the demerger transactions during the Rulings' term. These Rulings provide clarity and guidance on the tax treatment for those directly involved in the demerger process, ensuring that the tax implications are understood and properly applied.

Key Provisions

The key provisions of the rulings CR 2018/59 and CR 2018/60, issued by the Commissioner of Taxation, concern the income tax implications of the demerger of Coles Group Limited from Wesfarmers Limited. The rulings apply from 1 July 2018 to 30 June 2019 and remain applicable to entities that entered into the specified scheme during this period. These rulings provide clarity on the tax treatment for shareholders involved in the demerger process, as well as the implications for employee share schemes within the companies (CR 2018/59 and CR 2018/60). Under these rulings, the obligations on the parties involved primarily relate to ensuring compliance with the specified tax treatments outlined for the demerger and associated employee share schemes. Shareholders of Wesfarmers Limited must understand their tax liabilities in relation to the demerger, while both Wesfarmers Limited and Coles Group Limited must accurately report the tax implications of any employee share schemes in accordance with the Commissioner’s guidelines (CR 2018/59 and CR 2018/60). This includes maintaining proper records and documentation to substantiate their tax positions. Failure to comply with the provisions outlined in these rulings may result in significant penalties. The Commissioner of Taxation has the authority to impose penalties for non-compliance, which can include substantial fines and interest on any unpaid taxes. The maximum penalties will depend on the specific circumstances of the breach but can include up to 75% of the unpaid tax amount for serious or repeated non-compliance. Additionally, there may be civil or criminal consequences for deliberate or reckless breaches, including potential prosecutions and convictions that carry their own penalties.