There is some confusion (created by the ASX) around BHP and Woodside (WDS) and while we don’t have all the answers (yet) and MM cannot provide tax advice (please consult your tax adviser), here is what we know. The final distribution was determined at close of trade yesterday based on the ratio of 0.18 WDS shares for each BHP held. The payment is worth $5.36 in shares + $2.35 in franking with the payment (in WDS shares) being made today. The ATO has ruled the sale proceeds are indeed a “dividend” but the ASX it seems has treated the proceeds as a demerger. The position taken by the ASX to treat the dividend as a demerger is not consistent with the ATO ruling. Importantly, BHP’s share price did not trade ex-dividend on 25 May as was expected but the share price was adjusted after the close of trading on 24 May as if the process was a demerger, and the share price adjustment included both the dollar value of the dividend plus the implied value of the attached franking credit.
The ATO’s ruling means the dividend paid by BHP, in the form of WPL shares, is a taxable event in the current financial year, the dividend is to be fully franked and as such the franking credits can be applied against this taxable event, while the cost base of the WDS shares passed through by BHP will be set at the price at $29.76 i.e. the close of trade yesterday while the BHP share cost base does not change as the ATO has deemed this dividend, not a demerger, however, the ASX needs to clear this up. The ASX has said: “ASX is treating the issue as a bonus entitlement in the system (and trading BHP ‘XB’ and not ‘XD’) to overcome system limitations of handling an in-specie distribution to BHP holders of new stock in an already-listed entity, Woodside.” We will provide more info when we can.
MM remains bullish & long BHP
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