Assume the following facts and respond to the task below: 

• The buy-back is finalized. The market value of the shares at all relevant times leading up to the buy-back is $31 per share. 
• The buy-back price was $28 per share ($5 debit to share capital account, with the rest paid from retained earnings).
• Any deemed dividend component of the buy-back payment would be fully franked.

Using the template table attached, calculate the consequences per share of participating in the buy-back per share for three kinds of entities (individual, superannuation fund, and company). Calculate the income tax consequences (including capital gains), and net cash consequences of participating in the buy-back compared to selling the shares at the market value.  Assume the relevant shares were acquired at a value of $20 each 2 years ago.

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Calculations Resource Table 1: per share tax and net cash consequences of selling shares on the market Step 1: calculate income tax on capital | Individual (assume marginal tax rate Superannuation fund (15% tax rate) gain of 47% including Medicare levy) (01) $20 (ii) $31 (iii) $11 (iv) $2.60 Cost base Sale proceeds Gross gain Net tax per share (after capital gains discount) Step 2: Calculate total net cash impact $28.40 of selling at market value $20 $31 $11 $1.10 $29.90 Bold Company (30% tax rate) $20 $31 $11 $3.30 $27.70 Calculations Resource Table 1: per share tax and net cash consequences of selling shares on the market Step 1: calculate income tax on capital | Individual (assume marginal tax rate Superannuation fund (15% tax rate) gain of 47% including Medicare levy) (01) $20 (ii) $31 (iii) $11 (iv) $2.60 Cost base Sale proceeds Gross gain Net tax per share (after capital gains discount) Step 2: Calculate total net cash impact $28.40 of selling at market value $20 $31 $11 $1.10 $29.90 Bold Company (30% tax rate) $20 $31 $11 $3.30 $27.70

Answer rating: 100% (QA)

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