Question 1:  I hold shares in Link (LNK) and have recently been allocated shares in PEXA  (PXA). What is the cost price I need to adopt for PEXA and what is the capital reduction I adopt for my Link shares?

Answer:  You received 1 PEXA (PXA) share for each 7.52 Link (LNK) shares owned (rounded down). The distribution should qualify for ‘Distribution Tax Relief’, and when this is confirmed by the ATO, the impact will be as follows:

1. The distribution per se will not trigger any CGT consequences;
2. You will apportion your current cost base for your Link shares between the Link shares and the new PEXA shares (e.g. if the proportion percentages when confirmed by the ATO are 75% for Link and 25% for PEXA, then you will allocate 75% of your cost base to your remaining Link shares and 25% to the new PEXA shares);
3. The acquisition date for your PEXA shares will be the same as the acquisition date for your Link shares.

Link has applied to the ATO for a class ruling and a draft ruling has been issued.  When this is finalised, Link will advise shareholders of the proportion percentages.

Question 2:  What is ‘tax deferred income’ when shown  on the annual tax statement from my property trust? Are there any tax consequences?

Answer: The story on “tax deferred income” is very short. It means that the income is not assessable for tax. However, the tax deferred amount reduces the cost base of the asset for capital gains tax purposes – so potentially when you sell the asset, you will pay more in tax because the “gain” is bigger. You need to keep a record of tax deferred income.

You usually don’t find out the amount of tax deferred income until the annual tax statement is received. Many property trusts have tax deferred income because of depreciation allowances.

Question 3: Are ZIP shares under-valued and still worth in investing in? Can ZIP ever be a $3.00 share again?

Answer: I think ZIP is undervalued, but the market is worried about cash burn and profitability of its US business. According to FN Arena, the analysts are quite bearish. Of the five major brokers, 3 have ‘sell’ recommendations and 2 have ‘neutral’ recommendations. The consensus target price is 67.2c, about the same as the current ASX price. The range is a low of 45c through to a high of 86c.

Can ZIP go higher? Yes. Can ZIP be a $3.00 share again – possibly, but highly unlikely in the short to medium term.

Question 4:  My strategy with the share market is long term growth, therefore I generally purchase stocks that pay good dividends and offer DRP (Dividend Reinvestment Plans). Is this sound?

Answer: Dividend re-investment plans are less attractive today because the shares are usually not issued at a discount. Further, they are viewed as being dilutive by institutional shareholders, so many companies don’t offer them (for example, market leaders BHP or CSL).

With brokerage so cheap, plus rules that allow existing shareholders to buy shares in parcels as few as one share at a time, they are arguably “past their use-by date”. I don’t choose to buy or sell stocks on the basis of whether the company offers a DRP or not.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.