Re: NRMA share buyback revisited -- Cox Business Accountants

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Date Posted: Thursday, July 11, 10:36:52am
Author: Chankhana
Subject: Re: NRMA share buyback revisited
In reply to: Karen 's message, "NRMA share buyback revisited" on Wednesday, July 10, 11:21:05am

Dear Karen,

Once again I don't know exactly what is contained in your document. To my knowledge, there are no capital gains involved in share buy back schemes. I think the "capital component" you are talking about refers to the cost base of the shares, which would be $1.78 if you received your shares through allotment.

The way that share buy back works is that any capital gains you make from the shares will be treated as fully franked dividends. For example if you received your shares during allotment, the price attached to those shares are deemed to be $1.78 at time of allotment. When you sell those shares in a buy back scheme, the gains you make from the sale will be treated as fully franked dividends.

For example, if the price of the buy back is $3.05 per share, then you will received $1.27 of fully franked dividends per share (the $1.27 is the diferrence between the allotment price of $1.78 and the buy back price of $3.05).

So I don't think you need to declare anything as capital gains. It would be deemed that you have received fully franked dividends from NRMA, which you do not have to pay tax on this.

I hope this clears things up for you. If you are not fully satisfied or you anymore questions, please feel free to contact us again. If you are still unsure about anything perhaps then you might like to seek advise from an accountant.

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Replies:

I think I will do what you say -- Karen, Thursday, July 11, 03:05:21pm