beppa -> pih tax implications, page-5

Dog, my understanding of the capital distribution (i.e. the 4cents being paid to ex BBI shareholders) is that it reduces the cost base of the original holding. For example, if $1.75 was paid it is reduced to $1.71 and the $1.71 is the cost that will be used to determine the final gain or loss when the shares are eventually sold (these 'shares' being the new PIH). In this circumstance, if the new PIH shares are still held at 30 June 2010 then the 4c/BBI capital distribution does not affect the 2010 tax return. It is only when the new shares are sold and the gain or loss on them is calculated that the 4c will be taken into consideration for the tax return (i.e. because it reduced the original purchase cost). When they are sold the 4c will either increase the capital gain made or decrease the capital loss depending on the original purchase price.

If, however, the BBI shares were bought recently at, say, 3.7 cents, the scenario is a bit different. Because the 4c reduction in cost base is more than the original cost (i.e. .03 more) then a capital gain is triggered on the excess. I.e. a .03 cents (not 3 cents) gain per BBI share will be included in the 2010 tax return.

This assumes that the holder is an investor and not a trader for tax purposes as well.

It is a bit more complicated than that because of the stapling....i.e. the values have to be split between BBIL and BBIT but the end result will be essentially the same as I mentioned above, especially since BBIT makes up the major apportionment.

This is for the 4c BBI distribution. The tax issues for BEPPA are different.

Just my understanding and not necessarily correct. Definitely not to be used as tax advice!

The ATO will also publish specific tax treatment guidelines regarding this in due course as well.