Wesfarmers : 2024 Tax Contribution Report 2162 KB

About this update from Wesfarmers Limited

6 December 2024 The Manager Market Announcements Office Australian Securities Exchange Dear Manager 2024 TAX CONTRIBUTION REPORT Please find attached a copy of the 2024 Tax Contribution Report which is also available on the company's website at www.wesfarmers.com.au . Yours faithfully Sheldon Renkema Executive General Manager Company Secretariat This announcement was authorised to be given to the ASX by the Wesfarmers Limited Board. 2024 Tax Contribution Report Contents About Wesfarmers About Wesfarmers 1 Our businesses 2 Message from the Chief Financial Officer 3 This 2024 Tax Contribution Report (Report) provides stakeholders with the necessary information concerning Wesfarmers' Australian tax activities for the 2024 financial year. Introduction to this Report 4 Approach to this Report and tax matters 5 Effective company tax rate 5 Reconciliation of accounting profit to income tax expense and income tax payable 6 Material temporary and permanent differences 6 Tax information published by the ATO 6 International-related party dealings 7 Australian tax contribution summary 8 From its origins in 1914 as a Western Australian farmers' cooperative, Wesfarmers has grown into one of Australia's largest listed companies and private sector employers, with approximately 120,000 team members, and is owned by more than 495,000 shareholders. With headquarters in Perth, Wesfarmers' diverse businesses today span: home improvement; outdoor living products and supply of building materials; general merchandise and apparel; office and technology products; retailing and provision of health, beauty and wellbeing products and services; management of a retail subscription program and shared data asset and online marketplace; wholesale distribution of pharmaceutical goods; manufacturing and distribution of chemicals and fertilisers; participation in an integrated lithium joint venture, including operation of a mine and concentrator, and development of a refinery; industrial and safety product distribution; gas processing and distribution; and management of the Group's investments. Wesfarmers' businesses predominately operate in Australia and New Zealand. About this Report This Report covers the financial year ended 30 June 2024 and the prior comparative period is the financial year ended 30 June 2023. The Report provides an overview of the tax contributions made by the Wesfarmers Group and our approach to tax strategy and governance. In this Report, references to 'Wesfarmers', 'the company', 'the Group', 'we', 'us' and 'our' refer to Wesfarmers Limited (ABN 28 008 984 049) and its controlled entities, unless otherwise stated. All dollar figures are expressed in Australian dollars (AUD) unless otherwise stated. The information disclosed in this Report meets the requirements of the Australian Board of Taxation's voluntary Tax Transparency Code (the Code) and has been prepared in accordance with the Appendix to the Code issued by the Australian Accounting Standards Board. This Report should be read in conjunction with the Wesfarmers 2024 Annual Report, which can be accessed below: 1 2024 Tax Contribution Report Our businesses Bunnings Group Kmart Group Chemicals, Energy and Fertilisers 1 50% 50% 75% Officeworks Industrial and Safety Wesfarmers Health from November 2023 from July 2023 Wesfarmers OneDigital Other activities 50% 22.3% 50% 50% 1 On 30 May 2024, Wesfarmers Chemicals, Energy and Fertilisers announced the sale of assets used to conduct its LPG and LNG distribution businesses to Supagas and Clean Energy Fuels Australia respectively. The sales are independent of one another, with each subject to certain consents and approvals, and had not completed by 30 June 2024. 2 2024 Tax Contribution Report Message from the Chief Financial Officer On behalf of the Board, I'm pleased to present the Wesfarmers Tax Contribution Report for the 2024 financial year. At Wesfarmers, our primary objective is to deliver satisfactory returns to shareholders over the long term. Wesfarmers, and each of our divisions, has a strong commitment to compliance with taxation laws and regulations in the jurisdictions in which we operate. We are committed to rigorous tax governance practices and aim to have an open and cooperative relationship with all tax authorities. This commitment to best practice for taxation matters has been reflected in Wesfarmers maintaining a high assurance rating under the Australian Taxation Office's (ATO) justified trust program for income tax. Wesfarmers seeks to make the communities we are part of stronger, and the economic contribution we make through taxes paid is integral to this. For the 2024 financial year Wesfarmers' contributed $1.5 billion in government taxes and other charges and our effective company tax rate for our Australian operations was 28.8 per cent. Wesfarmers is proud to be a signatory to the Australian Government's voluntary Tax Transparency Code. This year's Tax Contribution Report is our ninth report and shows our continued support for corporate tax transparency. Anthony Gianotti Chief Financial Officer 4 December 2024 The Wesfarmers Way Our primary objective is to deliver a satisfactory return to shareholders. We believe it is only possible to achieve this over the long term by: Anticipating the needs of Looking after our team our customers and delivering members and providing a safe, competitive goods and services fulfilling work environment Engaging fairly with our Supporting the communities suppliers, and sourcing in which we operate ethically and sustainably Taking care of the environment Acting with integrity and honesty in all of our dealings 3 2024 Tax Contribution Report Introduction to this Report This Report details Wesfarmers' tax activities for the 2024 financial year together with our approach to tax strategy and governance. Wesfarmers makes a significant contribution to the communities in which we operate, including by paying team members and suppliers, generating wealth for shareholders and paying taxes and other charges to governments. In the 2024 financial year, Wesfarmers created wealth of $44.4 billion of which $6.3 billion related to salaries, wages and other benefits to our team members, $28.8 billion to suppliers for raw materials and inventory and $4.4 billion for rent, freight, services and other external expenses. We reinvested $1.0 billion in our businesses, while distributing $2.2 billion to our shareholders in the form of fully-franked dividends. Wesfarmers also paid $1.5 billion in taxes and other charges in the 2024 financial year and $0.2 billion in finance costs to lenders. We also collected an additional $2.7 billion in taxes and duties for the Australian Government, including Wealth creation and value distribution $4.4b for rent, freight, services and other external expenses V A L U Wealth creation E 1 I $44.4b D B S T R I U T N O I $28.8b $6.3b to team members (salaries, wages and other benefiits) $1.0b reinvested in the business $11.2b $2.2b to shareholders (FY2024 dividends) $0.2b to lenders (finance costs) employee Pay As You Go (PAYG) withholding tax, excise and customs duty, and net Goods and Services Tax (GST). Wesfarmers' annual economic contribution ($ billion) 2024 44.4 2023 43.7 2022 37.2 2021 34.1 2020 31.7 for supplies of raw materials and inventory $941m Australian income tax expense 2 $1.5b $313m Government (taxes and other Australian payroll tax charges) $200m Other (including foreign taxes) 3 The total wealth created represents revenue, other income and share of net profits of associates and joint ventures. The value distributed represents the expenses incurred and dividends determined for the 2024 financial year. The $941 million income tax expense relates to Australian operations only. Other relates to local government charges, fringe benefits tax (FBT), government royalties and foreign taxes reported in the 2024 financial year. 4 2024 Tax Contribution Report Approach to this Report and tax matters Effective company tax rate Basis of preparation Tax transparency information was included in the Wesfarmers 2024 Annual Report and is set out at notes 3 and 26 to the financial statements on pages 142 and 175 respectively of the Wesfarmers 2024 Annual Report. All other financial information included in this Report was sourced internally. Ernst & Young audited the Financial Report included within the Wesfarmers 2024 Annual Report. Ernst & Young has not separately audited this Report. Tax policy, strategy and governance Wesfarmers is committed to full compliance with its statutory obligations and takes a conservative approach to tax risk. Wesfarmers' tax strategy and governance is implemented through Wesfarmers' Group Tax Policy (the Policy), which is part of Wesfarmers' corporate risk management and policy framework. Wesfarmers' approach to regulatory compliance is to operate and pay tax in accordance with the tax law in each relevant jurisdiction. We aim for certainty on all tax positions we adopt. Where the tax law is unclear or subject to interpretation, external advice is obtained, and when necessary, the ATO (or other relevant tax authority) is consulted for clarity. Wesfarmers seeks to have a transparent and cooperative relationship with the ATO and other relevant tax authorities. This includes early engagement on significant transactions. The ATO conducts an annual review of Wesfarmers' Australian consolidated income tax returns in accordance with the Pre-lodgement Compliance Review (PCR) process. The PCR arrangement formalises the requirement for Wesfarmers to disclose to the ATO all material transactions undertaken. Wesfarmers is also part of the ATO's top 100 justified trust program. How it is calculated The effective company tax rate is calculated as income tax expense divided by accounting profit before income tax expense. Income tax expense captures taxes on profits and excludes other types of taxes such as GST, FBT and PAYG withholding tax paid on behalf of employees. The effective company tax rate will differ from the statutory company tax rate of 30.0 per cent due to permanent differences. Permanent differences are amounts which are recognised for either accounting purposes or tax purposes, but not both. For example, the receipt of dividend income from overseas subsidiaries is exempt income for Australian company tax purposes. Wesfarmers pays tax on the profit from which the dividend was paid in the country of origin. Temporary differences exist where amounts are assessable or deductible for tax at a different time to when they are recognised under accounting practices. For example, different depreciation rates may be used for tax and accounting purposes. The differences will eventually reverse over time when an asset is fully depreciated. Material temporary and permanent differences relevant to Wesfarmers are set out in notes 3 and 26 of the Wesfarmers 2024 Annual Report on pages 142 and 175, respectively. The Policy includes an internal escalation process for the Group's businesses to refer tax matters to the Wesfarmers Group Tax Manager. The Executive General Manager, Group Finance must refer any material tax issues advised to Group Tax to the Chief Financial Officer, the Audit and Risk Committee and the Wesfarmers Board as soon as practicable. Compliance with the policy is ultimately monitored by the Wesfarmers Board, through the Wesfarmers Audit and Risk Committee. Please refer to our tax transparency disclosures under the Global Reporting Standard GRI 207 for more information on governance. 2024 2023 Effective company tax rate % % Australian operations 28.8 29.9 Global operations 28.7 29.8 Australian operations (from continuing operations and inclusive of significant items) Wesfarmers had an effective company tax rate of 28.8 per cent for its Australian operations for the 2024 financial year, compared to 29.9 per cent for the 2023 financial year. As discussed above, the effective company tax rate calculations are based on income tax expense calculated under accounting principles and may not reflect the full income tax paid by the Wesfarmers Limited Australian tax consolidated group. On its taxable income calculated under Australian tax law, Wesfarmers paid tax at the rate of 30.0 per cent. 28.8% 29.9% 29.1% 29.4% 30.7% 2024 2023 2022 2021 2020 5 2024 Tax Contribution Report Reconciliation of accounting profit to income tax expense and income tax payable Material temporary and permanent differences The reconciliation of accounting profit to tax expense and tax payable, and the effective company tax rate information was previously published in the Wesfarmers 2024 Annual Report in notes 3 and 26 on pages 142 and 175, respectively. These disclosures were prepared for the statutory accounts in accordance with the relevant Australian Accounting Standards. The statutory accounts reflect the global accounting consolidated group, except where specifically noted otherwise. Income tax expense, reported on a company's income statement, is calculated by multiplying accounting profit for the year, adjusted for permanent differences, by the relevant corporate tax rate (30.0 per cent in Australia). In contrast, income tax paid or payable reported at note 26 in the Wesfarmers 2024 Annual Report, is calculated by multiplying accounting profit for the year, adjusted for both temporary and permanent differences, by the relevant corporate tax rate. Income tax paid or payable represents the estimated income tax paid or payable to the ATO and other tax authorities. A reconciliation of Wesfarmers' accounting profit to estimated income tax payable is set out in the table below. A detailed reconciliation of accounting profit to income tax expense and material temporary and permanent differences is disclosed on page 142 of the Wesfarmers 2024 Annual Report. There were no material temporary differences in the 2024 financial year. Permanent differences of $13 million comprise of non-deductible asset impairment write-downs, non-deductible entertainment and other non-deductible items. Tax information published by the ATO The ATO publishes certain Australian income tax information of more than 2,700 corporate tax entities annually. The following table reflects the Wesfarmers Limited Australian tax consolidated group's published income tax information for the 2020 to 2023 income tax years. The 2024 income tax return information will be released by the ATO late in the 2025 calendar year. 2024 2023 Tax paid or payable reconciliation $m $m Accounting profit 3,587 3,509 Income tax at the statutory rate of 30% 1,076 1,053 Non-deductible items (permanent differences) 13 9 Temporary differences: deferred tax (6) (50) Associates and other (23) (16) Utilisation of previously recognised tax losses - (2) Current year tax paid or payable 1,060 994 2023 2022 2021 2020 Australian tax consolidated group $m $m $m $m Total income 42,517 35,304 31,996 29,954 Taxable income 3,387 3,056 3,295 3,201 Tax payable in Australia (after offsets) 969 866 953 896 These amounts will differ from the tax numbers disclosed in Wesfarmers' annual reports for several reasons: The above amounts only reflect the Australian tax consolidated group whereas the Wesfarmers 2024 Annual Report includes the global Wesfarmers group of entities. Foreign subsidiaries and entities that are not wholly owned cannot be members of the Australian tax consolidated group. Tax payable disclosed in the table above includes credits for taxes paid on offshore income that is also taxable in Australia at 30.0 per cent. In October 2024, the ATO commenced publishing certain details of entities who claim the Research and Development (R&D) tax incentive. The latest data is for the 2022 income year. For the Wesfarmers Limited Australian tax consolidated group, the amount of R&D expenditure subject to the R&D tax incentive in the 2022 income year was $35 million. 6 2024 Tax Contribution Report International-related party dealings Wesfarmers is an Australian-based conglomerate, with active businesses across eight jurisdictions - Australia, New Zealand, Bangladesh, China, Hong Kong, India, France and Singapore. Given its current profile, Wesfarmers has relatively limited international-related party dealings. Wesfarmers always seeks to price international-related party dealings on an arm's length basis to meet the regulatory requirements of the relevant jurisdictions. Wesfarmers' key international-related party dealings are set out below: Key international-related Significant jurisdictions during the party dealing 2024 financial year Wesfarmers' international-related party dealings are summarised below: The Australian retail businesses source material amounts of trading stock from overseas, particularly through Asian based third-party suppliers. To facilitate this, Wesfarmers has offshore subsidiaries that coordinate these supplies. The Australian businesses pay the offshore subsidiaries for these services. Various administrative and support services are provided by Wesfarmers corporate office and divisional parent entities to offshore subsidiary businesses. As required by international cross-border tax rules, arm's length consideration is paid for these services. Other jurisdictions The Wesfarmers Group includes active subsidiary companies that are incorporated in jurisdictions outside of Australia as summarised in the table below. Country / Dependency Primary nature of activities Bangladesh • Coordinating the sourcing of trading stock - Kmart Group China • Coordinating the sourcing of trading stock - Kmart Group and Industrial and Safety Sourcing and logistics services Bangladesh, China, Hong Kong, India and Singapore Management services China, Hong Kong, India, and New Zealand Sale of goods and services New Zealand Re-insurance Singapore Royalties New Zealand For the 2024 financial year, the gross value of international-related party transactions in and out of Australia represented less than 0.8 per cent of revenue (FY2023: 0.8 per cent). Certain Wesfarmers retail businesses operate across multiple jurisdictions. To meet customer demand and manage stock levels, trading stock is occasionally transferred between jurisdictions, for which arm's length consideration is paid by the recipient of the trading stock. Various aspects of Wesfarmers' business operations are insured with third-party insurance providers. Wesfarmers has a regulated offshore captive insurance company in Singapore to better access global re-insurance markets. Insurance policy premium payments are made by Wesfarmers to the subsidiary for this purpose, with the majority of the premiums on-paid to external re-insurance providers. Certain Wesfarmers businesses operating outside Australia utilise intellectual property developed by Wesfarmers' businesses in Australia. Where appropriate, and as required by international cross-border tax rules, a royalty payment is made by the offshore subsidiary to the relevant Australian business. Hong Kong • Coordinating the sourcing of trading stock - Kmart Group India • Coordinating the sourcing of trading stock - Kmart Group • The provision of information technology (IT) and IT-enabled services - Kmart Group New Zealand • Active retailing operations - Bunnings, Kmart Group, Industrial and Safety, and Health • Financing activities - Corporate Singapore • Insurance company - Corporate • Coordinating the sourcing of trading stock - Kmart Group France • Wholesaler of Anko branded products - Kmart Group 7 2024 Tax Contribution Report Australian tax contribution summary Australian taxes borne by Wesfarmers Wesfarmers' global tax contributions were $1.5 billion in the 2024 financial year, of which $1.4 billion related to Australian tax contributions. The table and diagram opposite detail the types of taxes contributed by Wesfarmers to Australian federal, state and local governments. Australian taxes represent a significant proportion of Wesfarmers' $1.5 billion in global taxes and other charges in the 2024 financial year. Australian taxes borne by Wesfarmers 2024 2023 $m $m Income tax expense 941 969 Payroll tax 313 287 Local government charges 1 90 82 Fringe benefits tax 9 8 Government royalties 1 - Total 1,354 1,346 1 Government charges are generally comprised of local government rates and fees. 23% 7% 1% 0% 69% Income tax expense 2024 Payroll tax Local government charges Fringe benefits tax Government royalties Australian taxes collected by Wesfarmers In addition to taxes directly payable by Wesfarmers, the Group collected and paid $2.7 billion in employee PAYG withholding taxes, excise and customs duty, and net GST on behalf of the Australian Government in relation to the 2024 financial year. Wesfarmers is obligated to withhold PAYG tax from salaries and wages paid to employees on behalf of the government. Excise duty arises predominantly from the sale of LNG and LPG. Customs duty is a tax imposed on imports and exports of goods. Net GST is calculated as the total GST liability on taxable supplies less all GST credits attributable to the respective financial year. The table and diagram opposite show the percentage of each type of tax collected. The figures in the table opposite represent Australian taxes collected by Wesfarmers from continuing and discontinued operations. Australian taxes collected by Wesfarmers 2024 2023 38% 0% 62% $m $m Net GST 1,655 1,605 Net GST Employee PAYG withholding taxes 1,024 978 2024 Employee PAYG withholding taxes Excise and customs duty 13 25 Excise and customs duty Total 2,692 2,608 8

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