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Article 195: Buyback of CBA, Westpac and BHP |
| Article Description |
Deemed buyback proceeds are higher than actual amount received. . |
| Article Location(s) |
Simple Fund: Corporate Actions
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| Article Addition Added |
21/01/05 |
| Article Last Updated |
18/12/07 |
| Software Version |
Simple Fund 10.1 or earlier |
Article Details |
How to process a buyback where deemed disposal proceeds are higher than the actual amount received. This applies to a Westpac Buyback in June 2004, and a recent BHP buyback in 2005 so the same principles can be applied.
CBA Scenario
- For each CBA share held, $16.50 fully franked dividend will be received.
- The actual disposal price is $11.00 and the deemed disposal price (used for CGT calculation) is $13.92.
Question: Where should I clear the difference of $2.92 per unit ($13.92-$11.00) from the account 491?
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Article Solution |
Suggested Solution
Example: Assuming you currently hold 1,000 CBA Shares.
STEP 1: Record the dividend
Process a fully franked dividend of $16,500 ($16.50 x 1,000) with imputed credits of $1,071.43 ($7.07 franking credit per unit).
STEP 2: Dispose of CBA Shares at deemed price
Sell the shares at $13,920 consideration ($13.92 deemed disposal price per unit).
STEP 3: Clear account 491 Investment Disposal Proceeds
- Clear $11,000 (actual disposal price $11.00 x no. of shares 1,000) from the 491 Disposal Proceeds Account to the bank.
- The difference of $2,920 ($2.92 per unit) is to be processed as a non-deductible expense transaction as follows:
Credit 491 Account $2,920
Debit XXX New Expense Account $2,920
To process this expense transaction you will need to create a new expense account with the Tax Return Label set as Not applicable - Permanent Difference.
The June 2004 off-market buy back of Westpac Banking Corporation (WBC) is processed the same way. Refer to the ATO website http://www.ato.gov.au/individuals/content.asp?doc=/content/49949.htm for further details. |
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