Stapled securities are created when two or more different securities are legally bound together so that they cannot be sold separately. Many different types of securities can be stapled together - for example, many property trusts have their units stapled to the shares of companies with which they are closely associated.
The effect of stapling depends upon the specific terms of the stapling arrangement. The issuer of the stapled security will be able to provide you with detailed information on their particular stapling arrangement. However, in general the effect of stapling is that each individual security retains its character and there is no variation to the rights or obligations attaching to the individual securities.
Although a stapled security must be dealt with as a whole, the individual securities that are stapled are treated separately for tax purposes. For example, if a share in a company and a unit in a unit trust are stapled, you:
- continue to include separately on your income tax return dividends from the company and trust distributions from the trust, and
- work out any capital gain or capital loss separately for the unit and the share.
Because each security that makes up your stapled security is a separate CGT asset, you must work out a cost base and reduced cost base for each separately.
If you acquired the securities after they were stapled (for example, you bought the stapled securities on the ASX) you do this by apportioning, on a reasonable basis, the amount you paid to acquire the stapled security (and any other relevant costs) between the various securities that are stapled. One reasonable basis of apportionment is to have regard to the portion of the value of the stapled security that each security represented. The issuer of the stapled security may provide assistance in determining these amounts.
If you acquired your stapled securities as part of a corporate restructure you will, during the restructure, have owned individual securities that were not stapled. The way you work out the cost base and reduced cost base of each security depends on the terms of the stapling arrangement.
When you dispose of your stapled securities, you must divide the capital proceeds (on a reasonable basis) between the securities that make up the stapled security and then work out whether you have made a capital gain or capital loss on each security.
For examples covering stapled securities, see Guide to capital gains tax 2005–06.