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.
Telstra undertook an off-market buy-back of its own shares.
For more detailed information refer to the following documents:
In this example, it is assumed that 1,000 TLS shares have been bought back.
The deemed capital proceeds are $2.77 per share which is the capital component ($2.33) plus $0.44 per share (amount by which the CGT value exceeds the Buy-Back price).
The dividend component amounts to $2.27 per share.
Refer to the Buy-Back Consideration Statement from Telstra for these details.
Simple Fund 360 allows multiple transactions occurring on the same day to be posted as one journal entry. As all of the following transactions happened on the same date, a single journal entry will be used to record them. Please note that you can split this into multiple journals if you wish.
|Step 1||Record the share buy-back ($2.77 per share)||$2770|
Record the difference between the deemed capital proceeds ($2.77 per share) and the capital component ($2.33 per share) = $0.44 per share
|Step 2||Enter the Dividend Component ($2.27 per share)||$2270|
|Step 3||Input the Total Bank Receipt||$4600|
In this example, we are going to use Account 37500/TLS to record the difference ($0.44 per share) between the deemed capital proceeds ($2.77 per share) and the capital component ($2.33 per share). As this is a non-deductible expense, we need to change the tax label of Account 37500/TLS.
If you are already using 37500/TLS to record deductible expenses, you can create a new expense account and change the label following the steps below.
To change the label, follow the steps below:
- Go to Accounting | Chart of Accounts.
- Search for and select 37500/TLS.
- Select More Details>>.
- Change the Tax Label to Not Applicable - Permanent Difference.
- Select Save.
You can refer to the Non Tax-Deductible Expenses help for more detailed information.
Step 1 - Record the share buy-back and the difference between the deemed capital proceeds and the capital component
- Go to Accounting | Transaction List.
Select New Transaction and then Journal from the drop-down list.
Input the Receipt Date as per the statement received from Telstra and a Reference number. You can include a description of the transaction in the Description box.
Record a disposal to the 77600/TLS account. The consideration amount is $2.77 x number of shares bought back.
Review the Disposal Details panel. You can change the Contract Date if required to match the date the shares were actually bought back. Refer to the Buy-Back Consideration Statement from Telstra for this information.
Next, record the difference ($0.44 per share) between the deemed capital proceeds ($2.77 per share) and the capital component ($2.33 per share) as a non-deductible expense. On the next line under the Account heading, click into the Select an account box and locate Account 37500/TLS (the tax label was changed to Not Applicable - Permanent Difference in Step 1).
Input the debit amount for the expense ($0.44 x 1000 = $440 in this example).
Step 2 - Record the dividend component
Refer to the Buy-Back Consideration Statement from Telstra for payment details and franked amount.
Dividend amount = $2.27 x number of shares bought back
To record this, select Add line to add a new transaction line. Under the Account heading, search for the Telstra dividend account by typing 23900/TLS in the Select an account box. Input total dividend amount under the Credit column. ($2270 in this example) and review the Dividend Details to ensure they are correct.
Step 3 - Record the receipt to the bank
Select Add line to add a new transaction line. Under the Account heading, search for the Bank account by typing 60400 in the Select an account box and input $4600 under the Debit column.
- Select Post.