"I notice there are 3 types of dividends, 2 of which I am familiar with. However what is a Capital return? and is it treated the same as divends in terms of tax treatment?"
Most of the so called "high dividend yield" companies I listed are in fact set up as trusts of mainly infrastructure or utility companies. They are know as stapled securities and are traded on the ASX just like an ordinary share . Very few of them actually pay a dividend, but rather, pay a return of capital or pay interest on a loan note. The correct term for the payout is "Distribution". Most of these companies will issue, along with the distribution notice, an advisory notice of how the distribution is structured; and, usually of how to treat the tax implications. It is, therefore, best that persons should seek advice from the ATO website for the definitions of stapled securities and how to asses them.
Some of the stapled securities are very complex, so it is not within the scope of this forum to explain them in detail.
The basics of "capital return" is that it is a return of(in part) the original funds that were used to acquire the asset. It is not treated as assessable income for income tax return proposes for that year. However in must be recorded as reducing the cost base of the asset for when a capital gain event occurs.
i.e. SP Ausnet (SPN) Each security of SPN consists of one share in each of SP AusNet Transmission; and, SP AusNet Distribution; and, one unit in SP AusNet Finance Trust. [1]The 2009/10 final distribution of 4 cents per security comprises 1.591 cents from a fully franked dividend (39.8%); 0.148 cents from a return of capital (3.7%); and 2.261 cents from interest income (56.5%). The increased interest income component of the distribution is reflective of higher interest income received by SP Australia Networks (Finance) Trust.
