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Ann: Determination of in specie dividend - Woodside Merger, page-40

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Hobbit2233

1,173 Posts.

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23/05/22

23:42

Post #: 61577564
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Originally posted by bellenuit: ↑

OK, I get it now.

The BHP dividend, paid in the form of WPL shares, will be fully franked. The WPL shares themselves have no franking credits attached as they are not cum dividend.

However, the dividend for your tax return is the cash value of the dividend even though it is paid as WPL shares. So you will be told something like (using easy figures) you have received a fully franked BHP dividend to the value of $700. Since this is fully franked, you include in your tax return a grossed up dividend of $1,000 (= dividend of $700 plus franking credit of $300). The franking credit when fully franked is Dividend * 3/7. Note that this is a BHP dividend, not a WPL dividend. The 45 day rule that someone mentioned in a previous post only becomes an issue if you bought the BHP shares that entitled you to this dividend less than 45 days before the scheduled dividend payment date of 1st June (also subject to the other requirements of the 45 day rule). This is all you need to know about the dividend part of the BHP payment.

Now the fact that this dividend hasn't actually been paid to you as $700 cash, but as $700 worth of WPL shares means you must now look at the implications of this. The WPL shares you receive are not cum dividend (the last WPL dividend was paid on 23 March and no new dividend has been declared). But you need to keep a record of this for capital gains purposes because whenever they are sold you will have to pay capital gains tax.

The cost base of these WPL shares will be $700 (just as if BHP had paid you in cash and you used that cash to buy WPL dividends). Whenever they are sold, there will be capital gains (or losses) depending on the sale proceeds less this $700 cost base. This will be the case whether you elect to have them sold by the selling agent or you sell them yourself sometime later.

Even if sold on your behalf by the selling agent, the sale proceeds will unlikely be $700. This is because of the time difference between when the $700 was determined as the cost price (probably the closing price on 31st May - the day prior to allocation) and when actually sold by the selling agent, which may be several days later. So, those opting to have their WPL shares sold on their behalf, will have a capital gains (or loss) transaction in their 2022 tax return.

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Thankyou very much @bellenuit. That's a very detailed explanation and just what I needed. I really appreciate the effort you went to.
Its all clear to me now. Had to read it a few times though LOL.
I don't have to worry about the 45 day rule as I have held the shares for 2 years, so that's one less complication. But I will take careful note of the capital gains/losses side of things.
Thanks again!.

BHP Price at posting: $47.83 Sentiment: Hold Disclosure: Held
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Last $42.10		Change 0.910(2.21%)		Mkt cap ! $213.5B

Open	High	Low	Value	Volume
$41.88	$42.29	$41.69	$360.3M	8.529M

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No.	Vol.	Price($)
3	9922	$42.09

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Price($)	Vol.	No.
$42.12	11345	2

View Market Depth

No.	Vol.	Price($)
1	178	42.090
1	150	42.080
1	474	42.050
1	505	42.030
17	4004	42.000

Price($)	Vol.	No.
42.160	1000	1
42.180	298	1
42.200	1000	1
42.220	100	1
42.230	168	1

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