Illustrated Example

A SMSF has two parcels of WRT stapled security purchased on 1/7/2011 and 2/7/2012 respectively with the following cost bases and tax deferred adjustments:

Prerequisite Processing Checklist

Processing WRT Restructure - Fund Level (recommended if you process one fund at a time)

Navigate to Fund Level > Investments > Browse Corporate Actions 

1. Click on Action
   
   
   
   
2. An error message will be displayed, that is similar to the following
   
   
   
   
3. Click on Update Parcelling, this will automatically perform parcel matches and apply any tax deferred adjustment that occurred on 30 June 2014. Noticeably, the tax deferred amount increased significantly.
   
   
   
   
4. Click on Create Target, this will create Scentre Group (SCG) Stapled Securities.
   
   
   
   
5. Clicking on With Rollover Relief or not does not make any difference in this WRT restructure, as the CR 2014/77 para 38 and 39 have confirmed that WRT security holders retain their original (reduced) cost base and CGT date.
   
   All the tax deferred attached to the WRT units will be automatically transferred across to SCG units.
   
   
6. Click Submit, the screen will display the following: the merger ratio is 1000 : 918, for every 1,000 units in WRT you will receive 918 units in SCG. 6,082 / 1000 x 918 = 5,584 (any fractional entitlement is rounded up to whole unit).
   
   

Bulk Processing WRT Restructure - Business Level (Recommended when all 2014 distribution tax statements for WRT have been processed)

Navigate to Business Level > Investments > Corporate Actions Console 

1. Click on WRT, it will drill down to the corporate action and list all funds affected:
   
   
   
   
2. Tick the column header box to select all funds, click Process, 
   
   
   
   
3. Select with Rollover Relief, click Continue
   
   
   
   
4. All funds that are successfully bulk processed, will be in green. An envelope icon will be displayed in the Messages column for any error messages.
   
   
   
   You can hover over the envelope or click on it to read more details, they are generally related to a sale of units resulting in an insufficient holding or where a cost base adjustment cannot be properly matched. 
   
   

Appendix 1 - Why Class does not automate the in specie distribution of 0.11 cents per converted units of SCG for the creation of Westfield Trust and Westfield Holdings Limited? 

The annual statements for WRT currently display an in specie distribution which relates to the restructure. 

In most cases, they are nominal, immaterial and are designed to create additional entities so the new stapled securities Scentre Group (SCG) can be properly established.

To replicate the effect of these nominal in-specie distributions by WRT, the following set of transactions may be considered:

1. Process a Distribution Cash for WRT for the amount received as in-specie distribution, with accounting date on 27 June 2014 and payment date on 30 June 2014. In this example, 6,084 /1,000 x 918 x ($0.001 + $0.0001) = $6.14
2. Process a Capital Call for WRT for the amount equal in value to the in-specie distribution on 30 June 2014, they are used to match the amount in Step 1, e.g. $6.14.
3. Process a Distribution Tax Statement for WRT, classify the distribution income amount received in Step 1, e.g. $6.14 as tax deferred.

Note: The net effect on the cost base whether an amount is treated as tax deferred matched with capital call is the same.

For this reason, some users may form the view that because these are just internal transfers of cost base within the same stapled securities, therefore they may be disregarded. 

Given most clients have already processed their distribution tax statements for WRT ignoring the non-cash component, to reconcile to the distribution cash received, adding these steps may create extra work with no real cost base implications. 

If you still want to process this in specie distribution, please follow the prerequisite but optional step 2.5. 

Appendix 2 - What happens if the tax deferred adjustment will cause WRT cost base to go negative?

Class currently does not have the functionality to automatically reduce the cost base to nil and report the excess as a capital gain.

The current method is to record the excess tax deferred component on the tax statement from tax deferred field to discountable capital gains provided the WRT is held for more than 12 months, or other capital gains if WRT is held for less than 12 months.

Further Readings

• CR 2014/77 - Westfield Retail Trust: Merger with Westfield Group's Australian/New Zealand business
• Westfield Fact Sheet: How to determine the WRT cost base after merging into Scentre Group Stapled Securities 
• WRT Restructure Australian Tax Consideration
• WRT Restructure Explanatory Memorandum
• Website: http://www.scentregroup.com/investors/taxation-information/