Show download pdf controls
  • Woolworths Group Limited – demerger of Endeavour Group Limited

    This information is for shareholders of Woolworths Group Limited who received shares in Endeavour Group Limited due to the Woolworths demerger of Endeavour on 1 July 2021.

    On this page

    When this applies to you

    This information applies to you, and may help you prepare your 2020–21 or 2021–22 tax return, if all the following apply:

    • You were listed on the share register of Woolworths on 7:00pm Australian Eastern Standard Time on 25 June 2021 (the 'record date').
    • You held your shares on capital account, meaning you did not hold your shares in Woolworths as either
      • revenue assets as defined in section 977-50 of the Income Tax Assessment Act 1997
      • trading stock as defined in subsection 995-1(1) of that Act on the record date.
       

    You can't use this information if the taxation of financial arrangements (TOFA) rules in Division 230 of the Income Tax Assessment Act 1997 apply to you in respect of the demerger. If you're an individual, the TOFA rules will generally not apply to you unless you have made an election for them to apply.

    Use the Woolworths demerger of Endeavour calculator to work out your income tax position after the demerger.

    Background

    Woolworths conducted a demerger of Endeavour. Endeavour runs a retail drinks and hospitality business primarily in Australia. The demerger occurred through the reduction of share capital and a demerger dividend.

    Income tax implications

    Income tax implications include:

    Capital return and capital gain

    Part of the value of Endeavour shares you receive under the demerger is a return of capital to you. This is an amount of 71 cents for each Woolworths share you held at the record date.

    If the cost base (just before the demerger) of any of your Woolworths shares was less than this amount, you will have a capital gain for each of those shares equal to the difference.

    If you work out there was a capital gain, you may be able to disregard it. For information about disregarding a capital gain, see CR 2021/50 Woolworths Group Limited – demerger of Endeavour Group Limited.

    Example: CGT consequences of capital return

    Ben is an Australian resident. At the record date for the demerger, he owns 750 Woolworths shares with a cost base of $25.00 per share. Ben does not have a capital gain for any of the shares as the cost base for each share exceeds the capital return per share. Ben can't make a capital loss from those shares.

    End of example

    Cost base adjustments you must make to your Woolworths and Endeavour shares

    You must adjust the cost bases of your Woolworths shares and work out the cost bases of the Endeavour shares you acquire under the demerger.

    How to work out the cost base adjustments

    Use the steps below to work out the total of the pre-demerger cost bases of your shares under the demerger.

    This method works out the first element of the cost base and reduced cost base of your Woolworths and Endeavour shares. You may have other elements that you can include that will result in you having a higher cost base and reduced cost base.

    To work out the first element of the cost base and reduced cost base of each of your Woolworths shares just after the demerger:

    1. Add up the cost bases of all your Woolworths shares as they were just before the demerger.
    2. Multiply the result of step 1 by 0.8581.
    3. Divide the result of step 2 by the number of your Woolworths shares.

    To work out the first element of the cost base and reduced cost base of each of your Endeavour shares just after the demerger:

    1. Add up the cost bases of all your Woolworths shares as they were just before the demerger.
    2. Multiply the result of step 1 by 0.1419.
    3. Divide the result of step 2 by the number of Endeavour shares you receive for your Woolworths shares (the number of your Woolworths shares).

    For more information about elements of cost base, see Elements of the cost base and reduced cost base.

    You will need to keep a record of the adjusted and new cost bases. Use your records to work out if you make a capital gain or capital loss from a CGT event that happens to your shares (for example, if you sell them).

    Example: Cost base adjustments

    At the record date of the demerger, Prisha owns two parcels of Woolworths shares:

    • 500 Woolworths shares with a cost base of $20.00 per share
    • 1,000 Woolworths shares with a cost base of $15.00 per share.

    Prisha must adjust the cost base of her 1,500 Woolworths shares as follows:

    Step 1 is the total of the pre-demerger cost bases of Prisha’s Woolworths shares, so $25,000, which is (500 × $20.00) + (1,000 × $15.00).

    Step 2 is $25,000 × 0.8581 = $21,452.50.

    Step 3 is $21,425.50 ÷ 1,500 = $14.30.

    The first element of the cost base and reduced cost base of each of Prisha’s Woolworths shares just after the demerger is $14.30.

    Prisha works out the first element of the cost base and reduced cost base of the 1,500 Endeavour shares that correspond with her Woolworths shares as follows:

    Step 1 is the total of the pre-demerger cost bases of Prisha’s Woolworths shares so $25,000, which is (500 × $20.00) + (1,000 × $15.00).

    Step 2 is $25,000 × 0.1419 = $3,547.50.

    Step 3 is $3,547.50 ÷ 1,500 = $2.37.

    The first element of the cost base and reduced cost base of each of Prisha’s Endeavour shares just after the demerger is $2.37.

    End of example

    CGT discount on capital gain from a subsequent CGT event – Endeavour shares

    To work out your entitlement to a CGT discount, if you received an Endeavour share that corresponds to the Woolworths share use the date you acquired the Woolworths share.

    Example: Deemed date of acquisition for CGT discount purposes

    On 24 August 2021, Enrique sells an Endeavour share he acquired under the demerger. The amount of his capital proceeds from the sale exceeds the cost base for the share, so he has a capital gain.

    He bought the corresponding Woolworths share on 23 August 2020. The date he acquired the Endeavour share will be 23 August 2020. He uses this date for the purposes of working out his entitlement to the CGT discount.

    End of example

    Dividend component of distribution not taxed

    Part of the value of the Endeavour shares you receive under the demerger was a capital return. The rest of that value of the share is a dividend amounting to $5.50.

    Under the demerger rules, you don't include the dividend in your tax return as assessable or exempt income, so you don't pay tax on the amount.

    If you are a foreign shareholder, the dividend is not subject to withholding tax.

    Capital gains consequences from sale of Endeavour shares through the sale facility

    If your shares were sold through the sale facility, you would have received $6.205 per share from the sale agent, being the average proceeds per share.

    This would have happened if you were:

    • an ineligible shareholder, or
    • a small shareholder and you chose to have your shares sold through the sale facility.

    You can find the definitions of these terms in Woolworths demerger of Endeavour demerger booklet (PDF, 9.36MB)This link will download a file as at 10 May 2021.

    If the cost base of the Endeavour share (taking into account the first element of the cost base and reduced cost base worked out under cost base adjustments you must make to your Woolworths shares and Endeavour shares) is:

    • less than $6.205, you have a capital gain on the sale of that share equal to the difference
    • more than $6.205, you have a capital loss on the sale of the share equal to the difference.

    You made the capital gain or capital loss (if any) on the demerger date.

    However, you disregard the capital gain or capital loss (if any) for all your Endeavour shares if you are a foreign resident. That is unless you began using them immediately in carrying on a business through a permanent establishment in Australia.

    Example: CGT treatment of Endeavour shares sold through sale facility

    Sally is an Australian resident. She held a parcel of 150 Woolworths shares at the record date that she acquired during 2016 for $4,500.00 ($30.00 per share) including incidental costs.

    As she is a small shareholder, she decided to have the 150 Endeavour shares she was entitled to under the demerger sold through the sale facility.

    She then received $930.75 (150× $6.205) from the sale agent for her portion of all the shares sold through the sale facility.

    Each Woolworths share in the parcel had a cost base just before the demerger of $30.00 (which has not changed since Sally acquired them).

    Using the cost base adjustments steps, Sally works out the first element of the cost base and reduced cost base of her Woolworths shares and Endeavour shares just after the demerger to be as follows:

    • Woolworths shares: (150 × $30.00) × 0.8581 ÷ 150 = $25.74
    • Endeavour shares: (150 × $30.00) × 0.1419 ÷ 150 = $4.26

    Sally makes a capital gain of $291.75 from the sale (150 × ($6.205 − $4.26)). She may be able to apply the CGT discount to this capital gain.

    The other consequences for Sally are that:

    • she has no capital gain on the $106.50 (150 × $0.71) capital component of the distribution of the Endeavour shares to her
    • the dividend component of that distribution, $825 (150 × $5.50), is neither assessable income nor exempt income.
    End of example

    See also

    • CR 2021/50 Woolworths Group Limited – demerger of Endeavour Group Limited
      Last modified: 23 Sep 2021QC 66856