i am taking up the buyback , is anyone else. buy back price of...

i am taking up the buyback , is anyone else.
buy back price of $17 contains a capital component of $2.76 and a fully franked div of $14.24 .
this means if you paid more than $2.76 then you made a loss of (17-2.76=$14.24). so instead of paying tax you get to use a capital loss to offset other capital gains. tax may have to be paid on the dividend if you are on a higher tax rate than the company tax rate of 30%.
eg , say you hold 1000 shares that you paid $8 , you elect to take up the buyback. you make a capital loss of 1000*(17-2.76)= $14240
if say your tax rate is 40%, then you have to pay tax on the dividend ,
dividend = 1000*14.24= $14,240
franking credit = 14240*30/70 = $6102
your tax on rate of 40%, (14240+6102)*40%- 6102= $2034. you pay $2034.
say you tax rate is 20%, (14240+6102)*20%-6102= -$2034. you get back $2034.

so instead of paying tax on the gain of ($17-$8)*1000=$9000 you get a loss of 14,240 which you can carry for years if you have no current losses and only pay tax on the div , if your tax rate is above 30%.

note:if you buy the shares today you still qualify for the buyback but you cant use the franking credits on the dividends. to qualify for the franking credits you would have to have bought and held the shares for 45days, flt will be taken over and delisted in less than 45days.
bhp went up today because its profit was good but also because they are offering a buyback , to get the franking credits on bhp's buyback ,8-feb is the last day to buy. see their announcement today.

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