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Share buy-backs

 

04 Sep 10

Where shareholders have disposed of shares back to their company under a buy-back arrangement they may have made a capital gain or loss. Generally part of the share buy-back price includes a fully franked dividend. Timing is also important. It may be when an application is lodged to participate in the buy-back or if it is a conditional offer, the time the offer is accepted. Some recent share buy-backs and their tax consequences feature in the table below. It should be noted that this information generally applies to individual Australian residents for tax purposes who did not acquire shares under an employee share scheme and any gain or loss on the shares is regarded as a capital gain or capital loss (meaning the shares are held as an investment asset, not as trading stock or as part of carrying on a business, or to make a short-term or ‘one-off’ commercial gain.)

AUSTRALIAN SHARE BUY-BACKS  2000 - 2009

Please advise us if you are aware of listed company buy-backs during tax year 2008/09                                                                                                       Last updated: 22 October 2009

Company Date Shareholders
received
$
Dividend *
included
$
Capital +
proceeds
$

Notes
(see below)

Alumina Limited 23-Apr-07 6.48 6.12 1.36 16
Ansell Limited 13-Dec-04 9.20 None 9.20 10
BHP Billiton 23-Nov-04 12.57 10.47 4.04 5
BHP Billiton 3-Apr-06 23.45 21.35 5.96 11
BHP Billiton 26-Mar-07 24.81 22.31 7.39 14
Bluescope Steel 12-Apr-05 7.75 4.68 4.79 6
Boral 7-Apr-08 5.65 2.81 3.57 21
Central Equity Limited 15-Aug-05 2.00 1.50 0.68 15
CMI Limited 12-Dec-06

See Note 17 below for details

17
Coca-Cola Amatil 29-Jan-08 7.84 5.17 3.91 20
Coles Myer 23-May-05 8.30 5.30 3.84 7
Coles Myer 10-Jul-06 10.23 7.23 4.19
Commonwealth Bank 29-Mar-04 27.50 16.50 13.92 1

Commonwealth Bank

2-Apr-01 27.84 17.84 10.00  
Foster’s Group 22-Dec-03 4.00 2.19 1.81  
Foster’s Group 10-Apr-07 5.90 4.09 2.92 18
Foster's Group 15-Oct-07 5.82 3.99 2.27 19
Insurance Australia Group 21-Jun-04 4.40 2.62 2.16 2
Just Jeans Limited 24-Oct-01 1.35 0.47 0.88  
Lemarne Corporation 21-Nov-06 2.81 2.16 0.65
Lend Lease Limited 2-Oct-00 19.88 12.88 7.00  
Mayne Group 22-Mar-04 3.55   3.55  
NRMA Insurance (now IAG) 21-May-01 2.72 0.94 1.78 3
Rio Tinto 9-May-05 36.70 32.70 6.44 8
Seven Network 22-Dec-03 5.80 2.32 3.48  
Santos Limited 4-Dec-01 6.27 3.64 2.63  
St George Bank 16-Feb-06 25.69 19.15 10.59 13
TAB Limited 21-Mar-02 2.35   2.35  
Telstra 7-Oct-03 4.20 2.70 1.50
Telstra 14-Nov-04 4.05 2.55 2.25 9
Westpac 21-Jun-04 14.50 10.50 7.21 4
Westpac 19-Dec-05 19.13 15.13 5.18 12
Woolworths 14-Apr-03 11.40 8.52 2.88  

* In all cases the dividend as stated was fully franked

+ If the Capital Proceeds exceed the cost base, the difference is a Capital Gain. If the Capital Proceeds are less than the reduced cost base, the difference is a Capital Loss.

 Note 1: If the capital proceeds of $13.92 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2003–04. If $13.92 was less than the share’s reduced cost base, the difference was a capital loss.

Note 2: For capital gains tax purposes, shareholders are taken to have received $2.16 per share. If the capital proceeds of $2.16 were more than the cost base of the share, the difference was a capital gain in 2003–04. If $2.16 was less than the share’s reduced cost base, the difference was a capital loss.

Note 3: If shares sold were obtained under the demutualisation, there were no capital gains tax consequences, because the buy-back price consisted of capital proceeds of $ 1.78 and a fully franked dividend equal to the balance of the buy-back price in excess of $ 1.78. If the shares were purchased through the Facility there is a capital loss and if the shares were purchased on the market, whether a capital gain or capital loss was made, depended on the cost base of the shares.

Note 4: For capital gains tax purposes, shareholders are taken to have received $7.21 per share. If the capital proceeds of $7.21 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2003–04. If $7.21 was less than the share’s reduced cost base, the difference was a capital loss.

Note 5: For capital gains tax purposes, shareholders are taken to have received $4.04 per share in this off-market share buy-back. If the capital proceeds of $4.04 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004–05. If $4.04 was less than the share’s reduced cost base, the difference is a capital loss.

Note 6: For capital gains tax purposes, shareholders are taken to have received $4.79 per share. If the capital proceeds of $4.79 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004–05. If $4.79 was less than the share’s reduced cost base, the difference is a capital loss.

Note 7: For capital gains tax purposes, shareholders are taken to have received $3.84 per share. If the capital proceeds of $3.84 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004–05. If $3.84 was less than the share’s reduced cost base, the difference is a capital loss.

Note 8: For capital gains tax purposes, shareholders are taken to have received $6.44 per share. If the capital proceeds of $6.44 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004-05. If $6.44 was less than the share’s reduced cost base, the difference is a capital loss.

Note 9: For capital gains tax purposes, shareholders are taken to have received $2.25 per share. If the capital proceeds of $2.25 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2004–05. If $2.25 was less than the share’s reduced cost base, the difference is a capital loss.

Note 10: There was no dividend component. For capital gains tax purposes, shareholders made a capital gain if the cost base for their shares was less than $9.20 per share and a capital loss if the reduced cost base for their shares was greater than $9.20 per share.

Note 11:  We understand that for capital gains tax purposes, shareholders are taken to have received $5.96 per share. If the capital proceeds of $5.96 were more than the cost base of the share, the difference is a capital gain to the shareholder. If $5.96 was less than the share’s reduced cost base, the difference is a capital loss.

Note 12: For capital gains tax purposes, shareholders are taken to have received $5.18 per share. If the capital proceeds of $5.18 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2005–06. If $5.18 was less than the share’s reduced cost base, the difference was a capital loss.

Note 13: For capital gains tax purposes, shareholders are taken to have received $10.59 per share. If the capital proceeds of $10.59 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2005–06. If $10.59 was less than the share’s reduced cost base, the difference was a capital loss.

Note 14: For capital gains tax purposes, shareholders are taken to have received $7.39 per share. If the capital proceeds of $7.39 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2006–07. If $7.39 was less than the share’s reduced cost base, the difference was a capital loss.

Note 15: For capital gains tax purposes, shareholders are taken to have received $0.68 per share. If the capital proceeds of $0.68 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2005–06. If $0.68 was less than the share’s reduced cost base, the difference was a capital loss.

Note 16: For capital gains tax purposes, shareholders are taken to have received $1.36 per share. If the capital proceeds of $1.36 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2006–07. If $1.36 was less than the share’s reduced cost base, the difference was a capital loss.

Note 17: Investors received $1.20 plus one Class A share for each two CMI shares bought back from them, plus a rounding adjustment of an additional $1.20 cash and one Class A share for the additional share where an odd number of shares was bought back - the Tax Office has determined that, for capital gains tax purposes, investors are deemed to have received capital proceeds of $1.135 per share - (investors should note that the Tax Office has determined that the first element of the cost base and reduced cost base of each CMI Class A share that a participating shareholder acquired under the arrangement, will be equal to the market value as at 12 December 2006 of their CMI ordinary shares bought back, reduced by the total cash consideration received, divided by the number of CMI Class A shares allocated) - for capital gains tax purposes investors made a capital gain in 2006-07 on each share for which they had a cost base of less than $1.135 or a capital loss on each share for which they had a reduced cost base greater than $1.135.

Note 18: For capital gains tax purposes, shareholders are taken to have received $2.92 per share. If the capital proceeds of $2.92 were more than the cost base of the share, the difference was a capital gain to the shareholder in 2006–07. If $2.92 was less than the share’s reduced cost base, the difference was a capital loss.

Note 19: If the capital proceeds of $2.27 per share were more than the cost base of the share, the difference is a capital gain to the shareholder in 2007–08. If $2.27 was less than the share’s reduced cost base of each share, the difference is a capital loss.

Note 20: For shares held on capital account, the Sale Consideration of $3.91 represents the capital proceeds for capital gains tax purposes. A shareholder will make a capital gain on a share if the Sale Consideration per share exceeds the cost base of that share. The capital gain is the amount of the excess. Similarly, a shareholder will make a capital loss if the Sale Consideration per share is less than the reduced cost base of a share.

Note 21: For capital gains tax purposes, shareholders are taken to have received $3.57 per share. If the capital proceeds of $3.57 were more than the cost base of the share, the difference is a capital gain to the shareholder in 2007-08. If $3.57 was less than the share’s reduced cost base, the difference is a capital loss.

 

 
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