I have done some research for my own purposes (but disclaimer: I am not a tax agent and this is not tax/financial advice).
As far as I can tell, if you bought your shares for x cents per share then (assuming a 19c capital return):
(a) If x is greater than or equal to 19, your cost base reduces by 19c, but the capital return itself is not taxable and there are no franking credits (it is not a dividend); alternatively (b) If x is less than 19, then your cost base reduces to zero, and you would realise a capital gain of (19 - x) cents per share (which is logical because you would have locked in that gain, even if the shares would subsequently fall to zero - note that I am not saying that this is likely but rather I am using that as a scenario to illustrate the point)
The following is an example which I found (albeit from a while back, and I cannot guarantee that the treatment has not changed):
