I'm no expert (my disclaimer), but what I did pending further info from the ATO or BHP's website on the cost base, was to use " Add - shares added" with a zero cost base.
I also tried corporate spin-off but it would not accept a zero cost base.
Cost base can be adjusted later if it is deemed not to be zero by the ATO.
Maybe corporate spin off would work then??
Hope this is right, some one might correct me if I am wrong.
Forgot to add that you may have to use the original purchase dates and numbers of shares purchased for capital gains tax purposes, but I think that will be spelled out in the ATO ruling
Welcome to the Reckon Community.
Although it is called a "De-merger", which can be handled by Account Personal's Corporate Spin-off, from what I understand of S32 demerger, it is being funded by an "in-specie dividend" rather than a classic demerger of "splitting assets" between the two companies which involves adjusting your cost base for the original company.
The information you need for this transaction should be on the documentation sent you by BHP or call their shareholder information hotline. For your accounting and tax needs please talk to your accountant.
The transactions you will need to do is to receive a dividend payment and then use those funds to Buy S32 shares. Your cost base for S32 is the in-specie dividend value and the share price is that value divided by the number of shares allocated to you.
Hope this helps.
Sorry for the delayed response to your solution to my problem, but I was awaiting some sort of communications from BHP/South32 on the demerger. Unfortunately nothing to date.
As far as I am aware, an ”in-specie dividend” of $2.13 has been declared by BHP, but I can not find any investor information of this. However, irrespective of the cost of S32 shares, both yours and Mr. Phillips, recommendations have some shortcomings. Using the "Corporate spin-off" results in a "Return of Capita" for BHP, which is quite different from the actual S32 share costs. I believe it takes into the calculations the difference in the actual and calculated BHP share price. This results in the difference in cost price of S32 to that based on actual "Corporate Spin-off" and that the figure calculated by Reckon. Therefore all future "price gain/loss" indications are also incorrect. By adjusting the S32 share price under "Buy - Shares Bought" and the BHP "Capital return" to that of the actual "in-specie dividend" will rectify this problem. However I do not think that this procedure was what was envisaged by Reckon.
Using Mr. Phillips' solution results in no S32 "Cost Basis" and therefore no future "Gain/Loss" nor "Gain/Loss(%)" indication.
Finally, I would appreciate some indication when Reckon will include South32 in the "Download Securities" list.
The Corporate Securities Spin-off is the correct way to do this, but I don't like it for a number of reasons:
- it often results in fractional share quantities, whereas the allocation is usually rounded to a whole number; and
- the process won't let you use an existing share. The data to correctly do this transaction is generally released weeks after the event, so most people have already created the share.
- determine the cost basis of your existing ATO Shares;
- Apply the ATO ratio (more on this later) to the cost basis of the S32 shares (Original Cost basis x ratio);
- Reduce the cost basis of existing BHP shares via a return of capital;
- Buy the S32 shares. Total Cost = S32 Cost Basis
- I have a step by step procedure on my website here. This talks about the TOL VBA demerger but the BHP S32 demerger has the same process.
So what do do in the meantime?
I think the ATO ratio will value the S32 cost basis at around 7.5% of your BHP cost basis. My suggestion is:
- Buy the S32 shares using the number of shares equal to your allotment and Total Cost = 7.5% x BHP Cost Basis. Date Transaction 25 May 2015.
- When the ATO ratio is available, edit this transaction using the ATO Cost Basis (ATO Ratio x BHP Cost Basis)
- Enter the Return of Capital transaction dated 25th May
Regarding the price download, I have just tested mine and it has downloaded the last 5 days. You will need to manually enter prices before this if you want the full history.
Graham Boast 0409317366
Reckon Accredited Consultant
Thank you very much for you quick response. I shall try to find out the actual BHP cost basis and the ATO factor to find out the true costs for S32 shares.
As far as the price downloading I cannot even get the code using the "Edit security details".. When trying the "Look up Symbol" the "Stock Code Search" gives a message "Your search returned 0 results". All the other investments are downloading their respective prices correctly.
- If you have entered your transactions correctly, Reckon should show the cost basis of your BHP Shares in the Security Detail View (go to Securities List and doubleclick on BHP.
- The ATO ruling hasn't been released yet, but it should be available here when published:
- The lookup symbol doesn't work - just type in S32
Thank you for your response.
My cost basis are correct for both BHP and S32. My only problem is downloading S32 share prices. All other investments download and update correctly. Why I have mentioned the lack of automatic working of South32 "Look up Symbol" function, as I believe that the update of S32 share prices and the finding of the security symbol are somehow connected. I have in fact manually typed it in.
Many thanks for your prompt responses. My configuration was exactly the same as yours, but I could not get an update of the S32 share price. Finally in great frustration I have deleted all references to South 32 and reinstalled it from sketch and behold, all of a sudden it started to work. I managed to download the last five days of S32 prices. I just have to wait a few days to make certain that it will keep working.
Once again many thanks for persevering with me over the last few days and your very prompt responses.
Sounds like the security item became corrupt in some small way. For future reference, If everything is setup correctly and correct procedures are being followed, and the problem persists, Validate and SuperValidate the file and try again.
Please see BHP's latest communication (10/6/15) at:
"Such [Australian resident] shareholders will be sent a letter providing further detail on the class ruling to assist in calculating the tax cost base allocation of BHP Billiton and South32 shares."
The ATO has released its tax ruling on the merger:
This ruling includes the comment on the value of the distribution:
"26. The value of the BHP distribution amount of $7,226,304,986 was worked out by reference to the volume weighted average price of the South32 shares, $2.25, as traded on the ASX over the five trading days from when deferred settlement trading commenced on 18 May 2015."
The corporate spin-off information is now available.
I did it as a corporate spin-off as a 1 for 1 spin off on May 25
The value of S32 is $2.25 and the value of BHP is $29.44. (these values are supplied to adjust the capital value of both companies)
Providing this information will adjust the capital value of both sets of shares accordingly (for future capital gains calculations when you sell)
Note that if you have BHP shares in more than 1 account, only do this once, as the share split will be applied to each account.
I would recommend against a more complex approach of doing a capital return and share purchase, as the spin-off does appear to work and adjust your capital value of both companies.
You will need to edit the company information for S32 to check the settings. Just make them the same as BHP.
If you have a look in the register of the brokerage account, the corporate spinoff is actually processed as a return of capital of BHP @ 2.25 per share, and a buy of S32 @ $2.25 per share. It has exactly the same result whichever way you do it. The price entered for BHP of $29.44 seems to be reflected only in the price history and has no impact on the cost basis.
Both methods are correct: the corporate securities spin-off has the advantage of doing multiple holdings at once, and the disadvantages of not being useable if you already have the share set up. In addition, in some spin-offs the ratio can yield a fractional value different from the allotment.
The capital return / buy is two transactions, but I like the fact that you can see exactly what is happening and why.
Horses for courses I guess.
Corporate Securities Spin-Off
Return of Capital. The amount = cost basis of BHP shares x 7.1%
Buy. No of Shares = amount allotted. Total Cost = Return of Capital amount calculated above.
With both methods, you should check your BHP Cost Basis before you enter the transactions, then check the cost basis post-demerger and ensure that the amounts are correct. BHP = 92.9% of original cost basis and S32 = 7.1%.
The key for this is to get the cost base split correctly, which CSO screen provides.
I noticed this since I have 2 accounts with different cost per share of BHP shares, which result in different cost per share of S32 shares.
All this is easy, compared to getting the correct cost base for the Westfield Trust restructure last year !
I still haven't bothered to fix that as yet.
I used the "Corporate Securities spin off" transaction. It reflected BHP as "Return of capital". However i encountered 3 problems:
a. In P&L return of capital shows under "Uncategorised" account. Did I miss something?
b. The reduction of cost of BHP was not uniform across my 300 shares. I expected that it will proportionately reduce cost. It did not. I am not sure what basis it adopted to adjust BHP cost
c.. The ATO ruling mentions that date of acquisition of S32 is the same date as date of acquisition of original BHP shares. However, using above method, all shares will reflect as acquired on 27/5/2015.
Could you please advise?
a) Have a look in your "Brokerage Account" (in the Accounts List under "Investing Accounts". There will be 2 transactions: a Return of Capital and a Buy. In the Return of Capital, leave the "Transfer Account" blank. In the Buy, ensure "from the accounts cash balance" is selected under "Use Cash from this transaction".
b) hmmm - I will have to test this, but unlike a sell, a return of capital doesn't allow any scope for applying different treatment to different lots of the same shares.
c) if you wanted to, you could backdate the buy date, but if you have different lots, you may have to breakup into different "buys"
Reckon Accredited Consultant
a. My Accounts are exactly as described. Reckon nevertheless posts entries to "Unspecified"
b. Yes, strange. I could not find anywhere / any report on how the breakdown was calculated
c. If I do backdate it, it posts to previous years. Reckon pops a warning message. It will mess with previous year accounts. Strange problem, not sure if there is a solution.
I have some screenshots from my Reckon. For sake of privacy, I wil not post it online. I will send it to your email.
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 ?
Regarding companies such as GPT an Centro, I follow the Tax Advice from each to identify how much of the annual distribution is "Tax Deferred", which is code for a Capital Return, so I enter that each year, which means the QPP calculation on disposal will correctly reflect the Gain incurred (excepting the comment on multiple parcels above).