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.

Embedded content: https://www.youtube.com/watch?v=w4e577yvEeM&feature=youtu.be

1 Click on Fairfax, FJX on the Portfolio Overview Page to go to the individual holding page.

2 Click ‘Enter a new Trade or Adjustment’

FXJ and Domain Demeger guide step 1

3 On the pop-up window, select ‘Return of Capital’ from the transaction type dropdown.

FXJ and Domain Demeger guide step 3

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’

FXJ and Domain Demeger guide steps 4 - 9

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.

FXJ Demeger example

10 Click ‘Add or Import Holdings’

FXJ and Domain Demeger guide step 10

11 On the left hand side of the page, search for Domain or DHG to locate the security.

FXJ and Domain Demeger guide step 11

12 Select ‘Opening Balance’

13 Select ‘Opening Balance Date’ as 22 November 2017

FXJ and Domain Demeger guide step 12 & 13

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’

FXJ and Domain Demeger guide step 14 - 16

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

FXJ Demeger example 2

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 November 28, 2017 UTC