BGL do not provide accounting or taxation advice. The following is designed to act as a guide for Simple Fund 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps.
On the 18th of October 2017, Tatts and Tabcorp entered in the Merger Implement Deed under which Tabcorp proposed to acquire all the issued shares in Tatts. The Scheme was approved and became effective on 13 December 2017. On the 22nd of December 2017, Tabcorp paid to the eligible Tatts shareholders with the following Scheme Consideration for each Tatts share held:
- the scrip consideration of 0.80 New Tabcorp Shares; and
- the cash consideration of $0.265.
The cash consideration of $0.425 was reduced by a fully franked Tatts special dividend of $0.16 which was paid to the Tatts shareholders on 19 December 2017.
A fund has a holding of 10,000 TTS shares purchased on 23/07/2015 at a price of $3.99.
As a result of the merger, the fund will receive the following:
|Tabcorp Shares||= Tabcorp share per Tatts share held x Tatts holdings
= 0.8 x 10,000
|Cash||= Cash received per Tatts share held x Tatts holdings
=$0.265 x 10,000
|Special dividend||= Special dividend per Tatts share held x Tatts holdings
= $0.160 x 10,000
A fund can either choose to:
- Apply the scrip-for-scrip rollover
- Not apply the scrip-for-scrip rollover
This help file will look at both scenarios.
The payment of the special dividend is recognised as a ‘dividend’ as defined in subsection 6(1) of the ITAA 1936.1
The total dividend amount received
= special dividend received per share x Tatts holdings
= $0.16 x 10,000
This fully franked amount was received on 26 December 2017.
This will be recorded in Simple Fund 360 by the following bank journal:
|Account||Code||Debit ($)||Credit ($)|
|Tatts Group Limited - Dividends Received||23900/TTS.AX||1,600|
Below is the transaction recorded in Simple Fund 360:
The fully franked amount for the dividend will automatically be calculated and populated by Simple Fund 360.
1. CR 2018/6 paragraph 32
Cost Base Proportion - Partial scrip-for-scrip Roll-over
When the partial scrip for scrip roll-over is chosen, the cost base of Tatts that is attributable to the exchanged Tabcorp shares is worked out as follows:
|Cost Base of Tatts for the||Calculation|
The scrip component percentage will be entered in the Corporate Actions screen.
Scenario 1 - Scrip-for-scrip rollover applied
This example will assume that the fund has elected to apply scrip-for-scrip rollover to the acquisition of the Tabcorp shares.
Scrip for Scrip Rollover
Scrip for scrip rollover summary:
- Deferred Capital Gains
The rollover allows you to disregard the capital gain made from the original shares, units or other interest. You are taken to have acquired the replacement shares, units or other interest for the cost base of the original interest.
- Backdating to original purchase date
The replacement shares or interest, are taken to have been acquired on the original shares' or interest's purchase date.
|From the Main Toolbar, go to Investments.|
|Select Corporate actions from the list.||
Select New Corporate Action.
Ensure the following are recorded for step one:
|Security to Process||TTS.AX||This will be the existing security the demerger is recorded for|
|Corporate Action||Demerger||The corporate action type being processed|
|Chart Account||77600/TTS.AX||The chart account that will be affected by the demerger|
Ensure the following details are recorded for step two:
|Ex / Balance Date||21/12/2017||Simple Fund 360 will apply the demerger to parcels purchased before the ex date.|
|Corporate Action Date||22/12/2017||Simple Fund 360 will create a demerger transaction in the Transaction List based on the corporate action date|
|Select New Security||TAH.AX||If the fund did not currently hold shares in Tabcorp, this would be added by selecting Add New Investment|
|Date||Applying scrip-for-scrip, this will preserve the original contract of the Tatts holdings|
Record the details of the number and costbase of shares of the demerged security:
|Account required for the corporate action||77600/TAH.AX||Automatically populated by Simple Fund 360|
|Units in Head security after demerger||10,000||The original holding of TTS.AX shares|
|Units in Demerged Security||8,000||The amount of Tabcorp shares acquired|
|Demerged Security %||94.41||The proportion calculated previously. The head security percentage will populate automatically|
Select Process Corporate Action.
Proceed to the next step to process the cash consideration received.
In this example the cash consideration was received on the 27th of December 2017.
The cash consideration received is:
= Cash received per Tatts share held x Tatts shares held
= $0.265 x 10,000
This will be recorded in Simple Fund 360 by the following journal:
|Account||Code||Units||Debit ($)||Credit ($)|
|Tatts Group Limited shares||77600/TTS.AX||-10,000||2,650|
To record this transaction in Simple Fund 360:
|From the Main Toolbar, go to Accounting.||
|Select Transaction list||
- From the Transaction List screen, select New Transaction. From the drop down list, select Bank Statement.
- Input the Date of the cash received (27/12/2017 in this example) and a Reference (Simple Fund 360 will automatically produce a reference number, but it is editable). You can include a description of the disposal in the Description box.
- Under the Account heading, select the bank account from the Select an account box.
- Click on the next Select an account box. Begin typing and select account 77600/TTS.AX.
- Input the number of units to be disposed of (10,000 in this example) in the Units column to account 77600/TTS.AX and the amount of the disposal (cash consideration received) as a Credit. Simple Fund 360 will post a corresponding Debit entry to the bank account.
- Select Post.
Scenario 2 - No scrip-for-scrip applied
This example will assume that the fund has not elected to apply scrip-for-scrip rollover to the acquisition of the Tabcorp shares.
This will be recorded by the following journal:
|Account||Code||Units||Debit ($)||Credit ($)|
The credit amount for the Tatts shares includes the $7,470 capital gain. This will automatically be calculated and coded by Simple Fund 360.
To view this amount, clicknext to the credit entry for 77600/TTS.AX. This will show you the Disposal Details section