Australian Share Buy-backs 2000-2020

Off-market buy-backs are an attractive capital management option for companies and their shareholders. Companies can buy-back their shares at a discount of up to 14% to the market value of the shares. Shareholders receive part of their disposal proceeds as a franked dividend for tax purposes, and may also realise a capital loss.

If you receive an offer from a company to buy back some or all of your shares in the company under a share buy-back arrangement, you may make a capital gain or loss. When you make the capital gain or loss will depend on the conditions of the particular buy-back offer. For example, it may be the time you lodge your application to participate in the buy-back, or, if it is a conditional offer of buy-back, the time you accept the offer.

To work out whether you've made a capital gain or loss, you compare the capital proceeds with your cost base and reduced cost base. The capital proceeds are taken to be what the share's market value would have been if the buy-back hadn’t occurred and was never proposed, less the amount of any dividend paid under the buy-back. Both of the following conditions apply:

the shares are not bought back by the company in the ordinary course of business of a stock exchange – for example, the company writes to shareholders offering to buy their shares (commonly referred to as 'off-market share buy-back'), and

the buy-back price is less than what the market value of the share would have been if the buy-back hadn’t occurred and was never proposed.

In this situation, the company may provide you with the market value or may have obtained a class ruling from the Australian Taxation Office. If the buy-back price is what the market value of the share would have been if the buy-back hadn’t occurred and was never proposed, the capital proceeds is the amount paid, excluding any dividend paid.

Shareholders receiving a dividend in conjunction with an off-market buy-back should take note of the ATO’s updated guidance on the application of the 45 day rule and its impact on entitlement to franking credits. Broadly, the 45 day rule requires the shareholder to have held their shares ‘at risk’ for at least 45 days between the dates of acquisition and disposal of their shares. The 45 day rule has a “last in first out” (LIFO) rule, which deems shareholders to have disposed of their most recently acquired shares first for the purposes of working out whether they have satisfied the 45-day rule in respect of a dividend.  

An example of some of the off-market share buy-backs and their tax consequences feature in the table below. For the full table, updated at the end of each calendar year, please click on the link below the table.  

Companies featuring in the report: Aconex Limited Alumina Limited Ansell Limited BHP Billiton Bluescope Steel Boral Caltex Australia Central Equity Limited Century Australia Investments Limited CIC Australia Limited CMI Limited Coca-Cola Amatil Coles Myer Commonwealth Bank Commonwealth Prop (CPA) Eildon Capital Limited European Gas (EGL) Excelsior Capital Limited (formerly CMI Ltd) Foster’s Group Foster's Group Gotalk Limited Hastings Fund Mangt IMB Limited Insurance Australia Group Intrepid Mines Limited JB Hi-Fi Limited Just Jeans Limited Lemarne Corporation Lend Lease Limited Lion Selection Limited Longevity Group Australia Limited Macquarie Media Group Mayne Group McMillan Shakespeare Limited Metcash Limited MMC Contrarian Limited Monash Absolute Investment Company Limited Neon Capital Limited NRMA Insurance (now IAG) Oceania Capital Oceania Capital Partners Ltd OnCard International Limited Perpetual Limited Pinewood Community Financial Services Limited PM Capital Asian Opportunities Fund Limited PM Capital Global Opportunities Fund Limited Portman Limited Premium Investors Limited Progen Pharmaceuticals Ltd Qantas Airways Limited Reva Medical, Inc. Rio Tinto Seven Network Santos Limited Signature Capital Staging Connections Group St George Bank Suncorp-Metway (Notes SBKHB) Sunraysia Television Ltd TAB Limited Telstra Thinksmart Limited Tower Limited Tower Limited (small parcels) U&D Coal Limited Virgin Australia Holdings Ltd Westpac Woolworths