BHP demerger WDS

Can anyone help out with the processing of this Corp Action

The cost bases allocated do not seem to be correct if the info below is correct

Following the merger, Australian shareholders will have A$29.76 tax cost base for every Woodside share received. There will be no impact to the existing tax cost base of BHP shares for Australian shareholders as a result of the merger.

Hi Greg,
I don’t believe the class ruling for this corporate action has been issued by the ATO yet. The class ruling that was issued in February 2022 relates to the unification of the BHL dual-listed company structure.
Christine

A more fundamental question from me. Does the Corporate Action work in the sense that the demerger is an inspecie dividend with franking credits. Does the BHPXF investment need to be created? (I have sought a Support answer but this approach (Community) might be a quicker response.) Thanks

This is my intended approach. There will be two entries in “Accounting”. Select Journal. Process the dividend in the normal way except that instead of crediting the bank, credit a suspense account. Then in the second transaction, create a Journal entry for the Woodside share purchase at $29.76 per share, debiting the suspense account.
I hope that “Corporate Action” gives the same result!

1 Like

Thanks, Lloydy, you make a lot of sense.Will try your approach

The Corporate Action does nothing to address the In Specie div. or the WDS cost base so Lloydy is on the money thus far. You also need to be carefull that the CA does not affect the BHP cost base. Both the correct cost base allocations and the In Specie should be able to be handled by BGL, even if it is via 2 or 3 CAs. They really should be able to work this out!

Hi Leslee… BGL support could not tell me why we needed BHPXF ???

Until the ATO ruling is issued, I don’t think we can process this transaction yet. I intend to follow Lloydy’s process. Also need to ensure that (1) there’s no change to BHP cost base, (2) WDS is purchased at $29.76/share. (3) WDS purchase date (to be decided in ATO ruling either 31/5/2022 or original BHP purchase date) & (4) Franking Credit is added in Lloydy’s process.

Doesn’t look like BHPXF needs to be created. Looks like a manual process. The current CA process may not be able to do all the above.

BHP are pretty sure…

  1. Are there tax implications for BHP shareholders on receipt of Woodside shares?
    With the merger complete, eligible BHP shareholders have received a dividend (in the form of Woodside shares as an in specie fully franked dividend). Like with all dividends, BHP shareholders will be subject to a taxing event when they receive these shares.

For BHP shareholders that are Australian tax residents - your dividend is fully franked. The dividend of approximately A$5.38 (per BHP share) grossed up for franking credits of approximately A$2.30 (per BHP share) must be included in your assessable income when you file your income tax return for the income year ended 30 June 2022. The franking credits can generally be used to offset any tax payable on the dividend. Top up tax may arise for shareholders where the tax payable in relation to the dividend exceeds the franking credits attached. Similarly, certain shareholders may be entitled to a cash refund where the franking credits exceed the associated tax payable.

Following the merger, Australian shareholders will have A$29.76 tax cost base for every Woodside share received. There will be no impact to the existing tax cost base of BHP shares for Australian shareholders as a result of the merger.

They should not provide this info if a tax ruling is pending…

Dear BGL Simple Fund users,

Thanks for raising the concern.

The Product team is currently looking at this issue. The BHP link shared by Greg above (BHP Petroleum merger with Woodside | BHP) does shed some light on the accounting treatments needed for this corporate action.

We will wait further for the ATO Ruling if available at a later stage before providing any further updates on this issue.

Thanks
Eric

Great information flowing here. (Interesting reaction to the BHPXF query.) It looks like the CA would not give me (us) the answer. My support call has been escalated to the Product Team. Will keep you informed. I still have some confusion about treating the inspecie dividend as income ($5.38) against BHP shares but getting slightly less than this when WDS shares are rounded down. Can be up to $29.75 difference. Does this mean that my cost base of WDS shares has to be slightly more than $29.76 to have Lloydy’s transactions balance?

Wrote my last post before seeing Eric’s response. Happy to wait but enjoying the sharing of info.

Hi Leslee,

Thanks for your post and we have also updated your support call.

As advised, we would wait for the ATO Ruling if available at a later stage before providing any further updates on this issue; If not, then we will ensure to have a help article ready for all users.

Thanks
Eric

A little more information I gleaned last night… because it is not a sale I do not thinkthere will be an ATO ruling… could be wrong but…
BHP has divested the entire division to Woodside in exchange for Woodside equity. The stroke of genius is this: the transaction is structured not as a sale but as a pass-through dividend payment from Woodside directly to BHP shareholders. Let’s unpack that.

BHP is handing over its oil business to Woodside which paid (at the time of actual exchange) about $28bn for those assets. Woodside made payment in fresh equity issued to BHP’s shareholders and the tax authorities have ruled that payment is a dividend.

Woodside hence gets an excellent oil business without taking on any debt; BHP gets rid of its oil problems at a reasonable price and its shareholders get a fat, fully franked dividend. Along with Woodside equity, BHP shareholders will receive about $2.50 per share of franking attached to their Woodside stock. As we noted; a brilliant deal, cleverly structured.

I have not received a dividend statement from BHP’s share registry (Computershare) not can I find anything on Computershare’s web site. Has anyone else received the statement?
For most shareholders, there will be rounding down of up to $29.76. Because not actual benefit has been received for this rounding amount, I assume we could simply reduce the in specie dividend to the value of the WDS shares received. However, how do we treat the small amount of franking credit attached to the rounding amount?

From BHP… we wait

.BHP has applied to the Commissioner of Taxation (Commissioner) for a class ruling confirming certain income tax implications of the implementation of the Merger for certain Eligible Shareholders. It is expected that the final class ruling will be published by the Australian Taxation Office(ATO)shortly after the implementation of the Merger. The class rulingapplication is principally concerned with (i) confirming that demerger tax rollover relief will not be available in respect of the in specie dividend (ii) confirming the Australian income tax consequences of receiving the in specie dividend; and (iii) participating in the Sale Facility.

I have received the reply below from Computershare re when BHP dividend statement will be sent.

Quote
Thank you for your recent enquiry.
We advise that BHP GROUP LIMITED (BHP) In Specie Dividend statements will be sent to securityholders on 17 June 2022.

Yours sincerely

Customer Service Team

That’s the way I will process it as well!

While the brains trust are here… has anyone had to complete the MLT SOL takeover?