Telstra 2014 share buy-back – The Tax Effect

The ATO has issued a fact sheet in relation to the off-market share buy-back that Telstra announced in 2014. The fact sheet provides advice for Australian resident investors who hold their shares on capital account and are subject to the CGT provisions. Participating shareholders are taken to have disposed of their shares under the Telstra Buy-Back on 6 October 2014 – CGT event A1.

Break-up of buy-back price

Taxpayers received a payment of $4.60 per share that they sold. This amount consisted of:

a fully franked dividend of $2.27 per share; and
a capital component of $2.33* per share.
Note (*): for CGT purposes, participants in the buy-back are deemed to have received $2.77 as the capital component of the buy-back price.

What are the tax consequences of a taxpayer’s participation in the buy-back?

There are two tax consequences:

taxpayers must include the dividend and the franking credit in their assessable income for 2014/15; and
the sale of their shares (to Telstra) is a CGT event that may have resulted in a capital gain (or capital loss).
If you need help in this regard why not contact one of our Accountants at The Quinn Group on (02) 9223 9166 or submit an online enquiry.

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