Wesfarmers : 2016 Tax Contribution Report

1. FINANCE DIRECTOR'S INTRODUCTION

2. DISCLOSURES - PART A

1. Effective company tax rate

2. Reconciliation of accounting profit to

income tax expense and income tax payable

5 Identification of material temporary and non-temporary differences

6 DISCLOSURES - PART B

6 Tax policy, tax strategy and governance

1. International related party dealings

2. Australian tax contribution summary for corporate taxes paid

8 FURTHER INFORMATION

In this Report references to 'Wesfarmers' or 'the company' refer to Wesfarmers Limited (ABN 28 008 984 049) unless otherwise stated. References to 'the Group', 'we', 'us' and 'our'

refer to Wesfarmers Limited and each of its subsidiaries incorporated in any jurisdiction globally. References in this Report to a 'year' are to the financial year ended 30 June 2016 unless otherwise stated. All dollar figures are expressed in Australian dollars (AUD) unless otherwise stated.

This Report should be read in conjunction with the 2016 Wesfarmers Limited Annual Report available at http://www.wesfarmers.com.au/docs/default-source/reports/2016- annual-report.pdf

This inaugural Tax Contribution Report (Report) provides stakeholders with the necessary information concerning Wesfarmers'

Australian tax activities for the 2016 financial year.

CREATING WEALTH AND ADDING VALUE

REVENUE

$45.5B

Payments to suppliers

WEALTH CREATION

$13.8B VALUEDISTRIBUTION

$6.7B

Payments for rent, services

and other external costs

$ 8.4B

$ 1.5B

$0.3B

$2.1B

$1.5B

Employees

salaries, wages and other benefits

Government

taxes and royalties

Lenders

borrowed funds

Shareholders

dividends on their investments

Reinvested in the business

Terry Bowen

Finance Director

Wesfarmers is among Australia's top 10 taxpayers and importantly, we are the largest private sector employer in Australia.

This Report provides information

regarding Wesfarmers' Australian tax activities for the 2016 financial year, including transactions with international related parties, along with our approach to tax strategy and governance.

Wesfarmers makes a very significant contribution to the Australian economy. In the 2016 financial year, Wesfarmers generated $66.0 billion of revenue, which was distributed to our various stakeholders, including employees, suppliers, shareholders, governments and the community.

We paid $8.4 billion in wages and salaries to our employees, $45.5 billion to our suppliers and $6.7 billion for rent and other services. We invested $1.5 billion in capital expenditure in our businesses, while paying $2.1 billion

to our shareholders in the form of fully franked dividends. In addition, more than $110 million was contributed to the community through our businesses.

As one of Australia's top 10 taxpayers, Wesfarmers paid almost $1.5 billion

of taxes and royalties to Australian

governments in the last financial year. The Group also collected an additional

$4.2 billion in taxes and duties for the Federal Government, including

employee Pay As You Go tax, excise and customs duty, and GST.

In May 2016, the government announced the release of the Board of Taxation's final report on the voluntary Tax Transparency Code. The aim of the Code is to provide a mechanism by which medium and large companies can be held accountable for their Australian tax affairs, and to give stakeholders confidence that companies are compliant with their statutory obligations.

Currently the Code is voluntary. Wesfarmers supports the concept of voluntary tax transparency as an important measure for all large

companies to provide assurance to the Australian community that their tax obligations are being appropriately met. We know that Wesfarmers' success is dependent on the wellbeing

of the economies and communities

where our businesses operate and our conservative approach to tax strategy is one of the many ways we act to ensure sustainability of our operations. We are pleased to disclose our taxes paid in Australia and to detail our approach to tax planning for the first time.

Consistent with the Code, this Report is presented in two parts.

Part A:

• Effective company tax rates for our Australian and global operations

• A reconciliation of accounting profit to tax expense and to income tax payable

• Identification of material temporary and non-temporary differences

  Part B:

• Tax policy, tax strategy and governance

• Information about international related party dealings

• A tax contribution summary for corporate taxes paid

Part A of this Report provides greater context to the taxation information provided in the Wesfarmers' 2016 Annual Report. Part A should be read in conjunction with notes 3 and 30 of the Annual Report on pages 98 and 131, respectively.

WESFARMERS' EFFECTIVE TAX RATE ON AUSTRALIAN AND GLOBAL OPERATIONS

Effective tax rate - Australia

CONSOLIDATED 2016 2015

How it is calculated

The Australian company tax rate is currently 30 per cent of taxable income. Taxable income represents net profit for tax purposes, that is, gross income less any deductions or exemptions allowed in

the tax year.

The effective tax rate is calculated as income tax expense divided by accounting profit. The effective tax rate will differ to the company tax rate due to non-temporary differences.

Non-temporary differences are amounts which are recognised for either accounting purposes or tax purposes, but not both. For example, an impairment to goodwill (such as the impairment to Target's goodwill discussed below) is an expense for accounting purposes but is not an allowable deduction for tax purposes.

Temporary differences exist where amounts are assessable or deductible for tax at a different time to accounting. For example, different depreciation rates may be used for tax and accounting purposes.

Material temporary and non-temporary differences relevant to Wesfarmers are discussed in the final section of Part A of this Report.

Australian operations

Wesfarmers' effective tax rate was

67.8 per cent on Australian operations in the 2016 financial year. Adjusting for the impairment of Target's goodwill, which will never be tax deductible, Wesfarmers had an effective tax rate of 28.9 per cent for the 2016 financial year, which compares to

29.3 per cent for the 2015 financial year. Wesfarmers' effective tax rate is generally marginally lower than Australia's company tax rate of 30 per cent due to various non- temporary adjustments, including research and development concessions and earnings from offshore operations which are taxed in those jurisdictions.

Global operations

Wesfarmers' global effective tax rate for 2016, after adjusting for the impairment of Target's goodwill, was 28.1 per cent. Wesfarmers' global effective tax rate is lower than its Australian operations due in part to the corporate tax rate in most foreign countries being less than Australia (e.g., New Zealand 28 per cent, United Kingdom 20 per cent, China 25 per cent and Hong Kong 16.5 per cent).

The effective company tax rates for the Group's Australian and global operations are outlined in the adjacent table.

1 The $1,208 million impairment of Target's goodwill recognised during FY2016 was a non-deductible item.

Adjusting for the impairment of Target's goodwill, Wesfarmers had an effective tax rate of 28.9 per cent for the 2016 financial year.

Please refer to the 2016 Wesfarmers Annual Report for further details regarding accounting disclosures.

Alternatively contact

us on info@wesfarmers.com.au