Telstra’s 2014 share buy-back: its impact on 2014-15 tax returns

In 2014, Telstra announced that it would undertake an off-market share buy-back, with the buy-back results announced on October 6, 2014.

The Tax Office says participating shareholders are taken to have disposed of their shares accepted under the Telstra buy-back at that date (CGT event A1). It has released a fact sheet giving advice for Australian resident investors who hold their shares on capital account and that are subject to the CGT provisions.

Investors received a payment of $4.60 per share they sold. This amount consisted of a:

  • fully franked dividend of $2.27 per share;
  • capital component of $2.33 per share.

For CGT purposes, the Tax Office says participants in the buy-back are deemed to have received $2.77 as the capital component of the buy-back price. For more details, see this class ruling on the Tax Office’s legal database.

According to the Tax Office, there are two tax consequences:

  • investors must include the dividend and the franking credit in their assessable income for 2014-15; and
  • the sale of their shares (to Telstra) is a CGT event that may have resulted in a capital gain (or capital loss) for the investor. Depending on the outcome, investors may have to include some details on their 2014-15 tax returns.

See the fact sheet or ask us for more details on dividend treatment and capital gains consequences.