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Thanks Simmo,


I'm thinking of holding out until a couple of days before and selling on market if the price is still around $8.60. I don't really want to go through the whole acceptance bureaucracy and fund delivery latency. I want the money for other investment opportunities (whatever they are!). So for me I'm trying to balance:

  • Holding to see if a superior offer comes in as long as possible (eg. probably two trading days before 28MAR12)
  • And hoping the share price doesn't tank while I wait. If it does, then I guess I'd just have to fill in the paperwork (but couldn't I just wait to see whether I need to be compulsarily acquired? Or do I expose myself to a lower share price than even $8.65?
For me (unfortunately) brokerage isn't really an issue, so I can see no significant benefit to 'accepting' the offer. Philosophically I'd rather not 'accept' anyway and either be forced or sell on market to stronger hands (or at least someone else).


Is there anything fundamentally wrong with my thinking here? Any risks? What are you guys thinking?






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I sold my rights issue today and picked up ESI. If RIO of ITCHOU fold I will sell on market and move on about $400 broakge plus $2k difference between 8.60 and 8.65. Will look to pick up stocks that haven't gone ex dividend should be able to make up the $2k.



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You ask, are there any risks, if you listen to me mate, I have the dates in the wrong months, I am very sorry about that.


It closes on the 2/4/2012, but as I said earlier post your exceptance no later than the 28/3/2012.





I have been accumulating some stocks that are going to pay divvies, but dont forget you must hold the shares for


30 days or there are tax implications, so If you have bought shares say 20 before they go EX divvie you must hold them


for another 10 days before disposing of them, otherwise the TAX MAN WILL GET YOU.





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Simmo I think its 45 days you need to hold them if you are to get the full franking credits.


I could be be wrong and I need to get it right because I intend to buy a shate load of dividend paying stocks at the right time ie after the greek/portugese/spanish defaults and subsequent hits to our markets.

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Good evening

A suggestion, thats all

THIS IS NOT ADVICE to anyone, alive, half alive or that has passed into the darkness.


If you looking at income produceing stock, from the Div's to hold over a long term


Then forget about when, due to the Div and the going ex date

rather look for a lowish point in the stocks trading


but then again, does it matter if your holding long term

and example, I bought some


bhp 10.44, sold for a profit at 15.80

we have other bhp's also, that were obtained about the same time, or before and still holding


sto 3.07 till holding


news corp 7.28 sold for a profit, lousy Div payer


anz 2.46, and sadly sold for a profit at 5.10, thought thats fantastic, should have just 'kicked it under the bed' and forgot about it for a while


and a couple of others

the point is, over time you generaly do nicely for no stress, no worry and sometimes you even forget you were holding till the div notice arrives AND he franking credit


if you don't really need the money or can live without the extra money, then a Div reinvest program REALLY BUILDS the holding faster than you would think possible !


Suggest, before you buy, check out your super plan and then buy in your super plan

as you only pay 15% tax while your plan is in the growth stages,

HOWEVER when your in the bracket of retirement, the income earnt is tax free AND the franking credit is yours :rolleyes: .


In my situation our EXT is locked into our super plan, and while some people pay....lets say shocking amounts of tax by selling ext, via capital gain tax, I win a litle (well not really :) ) with no tax, which equals extra profit.


Lets say, this is an interesting subject, that most people doen't think about till too late.

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Ryan, Yes the SMSF does very well with fully franked dividends (I know you know this but I am saying this for the others who may or may not know this stuff).


An individual who is earning say $200K is in the 45% tax bracket. That means that when that person receives their fully franked dividend they still will pay tax on the dividend because the company was taxed at 30% but the individual should be paying at 45% so they owe some tax money. You would think that you'd owe another 15% but it does not work that way, if you calculate it out properly you end up at nearly 23% tax on the dividend received (Calculations below).


HOWEVER the SMSF only pays tax at 15% so when a company pays a fully franked dividend to a super fund something wonderful happens. You see, the company paid tax at 30% and that is too much tax, the super fund is now owed money by the ATO. It actually works out at nearly 23% of the dividend paid that comes to the super fund as a tax credit initially, and if that credit cannot be fully offset against tax owed then it will be a tax refund to the fund.


If you look at the banks now you will get somewhere around 7% in dividends, if you look at Telstra you will be getting around 8.5%. If you take Telstra and include the tax credit to the super fund you will be getting around 10.4 %


This is why SMSF people like me love dividend paying stocks in the fund.


Here are the calculations:


The Dividend paid to the investor = X


Company tax rate = 30%


Therefore the original profit upon which the company paid tax to be able to pay the investor dividend X = x / (1-0.3) = T = Original-Profit


So to calculate the tax credit (fully franked credit) = 30% x Original-Profit = Y (This is tax that has already been paid and therefore need not be paid a second time)


So now you look at the top marginal tax rate of the entity in question. For a person earning more than 180K the rate is 45%, for the SMSF it is 15%


So for the person earning more than 180K they should have paid 45% x T = Z


However tax of Y was paid by the company so the individual owes Z - Y = T (T is tax owing).


So if you divide T (tax owing) into X (dividend paid to investor) you will get 22.86%. That is how much of the dividend received a person earning 180K or more will have to pay in tax.


For the SMSF it also works out to be 22.86% only it is money the tax department owes the fund ... and that is beautiful.


I strongly recommend to anyone who cares to listen that they should set up their own super fund.


... and don't get me started on what happens when you can convert the SMSF to a TTR fund (Transition to Retirement) then you can get some serious advantages.

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A quick question on the SMSF issue, and thanks so so much for sharing your wisdom.


I have approx $200k in super at present, and am 42yo this year, all is currently in 2 funds (Rio Tinto Staff from my former employment with them and the rest with Australian Super) NB no fees at present on my Rio Staff account as they are good enough to cover those costs.


I have heard it it not worth setting up an SMSF until you have something in the order of $500k due to the annual auditing costs. Is this true?


Can you advise what it costs (roughly) to have the books done each year for an SMSF?


I am able to invest directly in some blue chip shares through my current funds, but there are limits on the % and the choice of stocks is limited as far as I can tell. If I were to buy dividend paying blue chips would the tax credits come my way as you describe below in a larger fund or only with a SMSF?


Thanks in advance



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Hi Simmo


I understand the 45 day franking credit rule. I'm in the pension phase, thanks to EXT and love the franking credits. It is a pity it is all coming to an end, it has been a great ride.


All the best



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