Thanks Diver Dave. I am sorry if I appear a bit obtuse but how do I go about recording the purchase of the three parcels of South32 if they are all acquired on 17th May? Wouldn't it be also contrary to ATO advice that the acquisition date should be the same as for the BHP shares?
Thanks for that, Diver Dave. I understand what you are saying about the capital gains/loss situation but I was not clear on your statement “you could record the purchase of 3 parcels of South 32” and wanted to know how to go about doing it.
This is what I have now done and would appreciate your comment on it:
I have created a Suspense Account although I could have used my Cash Account.
I have followed Method 2 as described by Graham Boast where the cost basis was the sum of costs of my 3 parcels of BHP shares and the amount of capital returned (7.1% of the summated cost) was placed in the Suspense Account.
For each individual original parcel of BHP shares, I have calculated the amount of capital return (i.e. 7.1%).
I have created a South32 account.
I have then entered in the South32 account three separate purchases of shares on the same dates and for the same number of shares as each of the BHP share parcels. Payment for each parcel was that calculated in para 3. The source of funds was the Suspense Account. I am now left with 0 balance in the Suspense Account and the cost basis of the S32 account is equal to the amount calculated as return of capital in para 2.
When I now look at the Security Detail View for BHP the Cost Basis is now 92.9% of the previous figure and for S32 the Cost Base is 7.1% of the previous BHP figure.
Although the total Cost Basis for BHP is now the reduced amount, the individual amounts as appearing in the Inv.Amt. column of the Transaction List have not changed and are still shown at their original values. I don’t understand this because I thought they too would now be shown at their reduced values as you implied when you said: “Reckon will reduce the cost base of each parcel proportionately”. Do you have a comment on this?
There has been a lot of discussion about this security spin-off, although I think it is much simpler that is being discussed.
Based on the prices of $2.25 for S32 and $29.44 for BHP, if at some stage you make a profit on the sale of S32 shares, 7.1% of all past BHP purchases can be allocated to the sale in your capital gains calculation; the ATO indicates this.
All that QPP has done is calculate the accumulated cost of shares and allocates 7.1% on the day of the spin-off. You need to keep track of the BHP purchase dates when estimating capital gains. It looks to me that QPP has done this accumulated cost correctly, but will probably incorrectly report the purchase date(s). I don't thing you will get better than that from QPP. Are the dates that complex?
Something for you to remember although I have forgotten what has happened with One-steel, Bluescope or Arrium?
Imagine the complexities of capital gains calculations if we were to ever make a profit on companies like GPT, with all their deferred tax and capital returns. The GFC at least made something simpler.
I was stating that QPP does do the cost base split correctly, but we are left to remember the correct (ATO permitted) purchase dates for S32 shares. These dates can affect the capital gains calculations in some cases, but probably not most.
I was also diverting to note that S32 is not the first case, as there are previous spin-off's by BHP.
And again, noted that other companies, such as those who do regular capital returns or deferred tax payments provide us with a much more difficult task, when we sell those shares. I have always been puzzled why the ATO lets companies such as GPT or Centro do such payments. I am sure most sellers of those shares don't get their capital gains calculation correct.
Is this any clearer ?