How to Process Share Buy-Backs in Class
A share buy-back is simply an offer a company makes to shareholders to buy-back some of its own shares - either offmarket or on-market. Buy-backs are generally very attractive to shareholders, especially those on a tax rate lower than
the corporate tax rate of 30% such as a SMSF, which is only paying 15% or close to 0% if the fund is in pension mode.
The buy-back transaction typically involves paying a franked dividend component plus a capital component. The franking
credits attached to the dividend can be used to offset against other income in the fund. Alternatively, excess credits can
be refunded in cash. The capital component is usually struck at a low amount and many shareholders use these capital
losses to offset capital gains, which further improves the tax attractiveness of share buy-backs.
The following is list of recent buy-backs announced in the Australian equity market:
 BHP Billiton (Class Ruling 2011/43)
 Woolworths (Class Ruling 2010/62)
 JB Hi-Fi (Class Ruling 2011/54)
Class Super uses a composite event under Corporate Actions > Buy Back to record all the details of buy-back transactions.
The following illustrated buy-back examples will use 100 units of shares of BHP, WOW and JBH respectively.
1) BHP Key Off-Market Buy-Back Details: (click through to BHP Buy-Back site)
Size
CGT Date
Market price
Buy-back discount
Buy-back price
Scale back
Number of BHP shares bought back
A$6.0 billion
A$47.4985
14.0%
A$40.85
78.27%
147 million
% of BHP Billiton Limited issued capital
4.4%
% of BHP Billiton Group issued capital
2.7%
Capital component
Additional capital component
100 Shares
14 April 2011
A$0.28
$28
A$9.03
$903
Fully franked dividend component
A$40.57
$4,057
Tax value
A$49.88
$4,988
2) WOW Key Off-Market Buy-Back Details: (click through to WOW Buy-Back site)
Size
CGT Date
Market price
Buy-back discount
Buy-back price
Scale back
Number of WOW shares bought back
% of Woolworths Limited issued capital
Capital component
Additional capital component
Fully franked dividend component
Tax value
A$704 million
100 Shares
11 October 2010
A$29.7951
14.0%
A$25.62
88.2%
27.5 million
2.2%
A$3.08
$308
A$2.92
A$25.46
A$28.54
$292
$2,546
$2,854
3) JBH Key Off-Market Buy-Back Details: (click through to JBH Buy-Back site)
Size
A$173 million
CGT Date
Market price
Buy-back discount
Buy-back price
Scale back
Number of JBH shares bought back
100 Shares
16 May 2011
A$18.60
14.0%
A$16.00
81.06%
27.5 million
% of JB Hi-Fi Limited issued capital
Capital component
9.9%
A$0.58
$58
Additional capital component
Fully franked dividend component
A$2.31
A$15.42
$231
$1,542
Tax value
A$18.31
$1,831
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