How to handle the Fairfax and Domain demerger
To find out more information on the Fairfax and Domain demerger check out our blog.
Sharesight makes it easy for investors to handle corporate actions (even complicated demergers) and track the capital gains tax implications. The benefit of using Sharesight to track the Fairfax (FJX) and Domain (DHG) demerger also ensures that you maintain an accurate record of your portfolio performance.
2 – Click ‘Enter a new Trade or Adjustment’.
3 – On the pop-up window, select ‘Return of Capital’ from the transaction type dropdown.
Based on the Domain Separation page set the:
4 – ‘Paid On Date’: 22 November 2017
5 – ‘Date of trade’: 22 November 2017
6 – ‘Capital Returns Value’: ($0.233 times by the number of FXJ Shares held on Scheme Record Date)
7 – Comment: Fairfax and Domain demerger. The Scheme Record Date is 7:00pm on 17 November 2017.
8 – ‘Choose a file’: to help keep your records in order, you can attach the Separation Scheme Implemented letter.
9 – Click ‘Save this trade’.
Example Own 200 FXJ as of the Scheme date - Capital Return Value is $46.60 = 200 FXJ x $0.233 tax cost base of FXJ shares per share.
10 – Click ‘Add or Import Holdings’.
11 – On the left hand side of the page, search for Domain or DHG to locate the security.
12 – Select ‘Opening Balance’.
13 – Select ‘Opening Balance Date’ as 22 November 2017.
14 – Input ‘Cost base’ - “the tax cost base per DHG share can be calculated by taking your Capital Reduction Entitlement ($0.233 times by the number of FXJ Shares held on Scheme Record Date) and dividing it by the number of DHG shares received. Subject to rounding, your DHG shares should have a tax cost base should be of approximately $2.33.” As stated on Domain Separation page.
15 – Input ‘Quantity’ as ‘1 Domain to every 10 Fairfax shares “If, as a result of this calculation, the number of Domain Shares is not a whole number, the number will be rounded up to the nearest whole number of Domain Shares.’ As stated in the Separation Scheme Booklet..
16 – Click ‘Save this holding’.
Example Own 200 FXJ as of the Scheme date - received 20 Domain Shares from the demerger Cost base is the capital returns value 46.60 Domain share price $2.33 = 0.233 x 200 FXJ shares / 20 DHG shares
Capital Gains Tax Implications
According to the official documentation, the capital reduction in Fairfax is not to be treated as a dividend and is subject to capital gains tax with the standard short and long term taxation rates applying.
Additionally, the implementation date (22 November 2017) is to be considered the acquisition date of the new Domain shares for CGT purposes.
This will be reflected in all Sharesight reports.
The guide above is a suggestion on how to handle the corporate action in Sharesight and is not finance or tax advice. We advise you to consult your financial advisor or accountant. We also encourage you to review the official Documents for full details.
Last modified on February 20, 2018 UTC