On the 19 December 2017, Tatts paid a fully franked special dividend of $0.16 which is assessable dividend income. If you purchased Tatts shares on or after 1 November 2017, you are not entitled to the franking credits on that dividend because of the holding period rule. If you are not entitled to the franking credits, you do not have to return the franking credits as assessable income.
On the 22 December 2017, Tabcorp Holdings Ltd took over Tatts Group Ltd.
The consideration received for each Tatts share was:
- 0.8 share in Tabcorp; and
- $0.2650 in cash.
The one day volume weighted average price (VWAP) of one Tabcorp share on the 19 December 2017 was $5.5897.
The total capital proceeds for one Tatts share is $4.7368 (0.2650+4.4718 (0.8×5.5897)).
If you held your Tatts on capital account, you will have a capital gain in the 2017–18 year and need to recalculate the cost base of your Tabcorp share.
Jane purchased 2000 Tatts shares in June 2015 which cost $4,500 (including brokerage) on capital account. For each Tatts share, Jane received $0.265 plus 0.8 Tabcorp share. Jane will need to calculate the amount of capital gain she made in the 2018 income year and the cost base of the Tabcorp share.
The capital gain and cost base of the Tabcorp shares are calculated as follows:
- number of Tatts shares = 2000
- cash received = 2000×0.265 = 530
- number of Tabcorp share received for Tatts share = 2000×0.8 = 1600
- cash value of Tabcorp shares received = 8944 (1600×5.5897)
- cost base of Tatts share exchanged for cash = (530÷(530+8944))×4500 = 251.74
- value of Tabcorp shares received = 4500−251.74 = 4248.26
- capital gain in respect of the cash component = 530.00−251.74 = 278.26
- cost base of the Tabcorp share = 4248.25÷1600 = 2.66.
Jane made a capital gain of $278 on the cash component which cannot be rolled over. As Jane made a capital gain on the takeover, she can elect rollover for the script component.End of example