Question 1: I have some CBA shares in various combinations of names, held since demutualisation that are not held by any broker. They have been allowed to accumulate with DRP (dividend re-investment plan). With the current high share price, I’m wondering how best to sell them. When I google that, there are brokers who offer the service but the commission seems excessive. I’m used to online broking with my main portfolio. What is the best way to sell them? I realise there will be CGT payable. Is there a formula for working out the cost base and the actual capital gain?
Answer: I would convert the shares onto your existing CHESS sponsorship and then sell them through your broker. If they are in different names, you may have to do a name change at the same time. A little painful, but well worth the effort (if you want to sell and save on brokerage).
If the shares are in different legal entities, then I would open new accounts with your broker in those names, and then sell the shares.
As for determining the cost base for CGT purposes, there is no easy or average method, or formula. It is share parcel by share parcel. To make it easier, the CBA lists on its website every DRP issue (going back to December 1991) and the cost base for each of those parcels. (see https://www.commbank.com.au/about-us/investors/dividend-information.html )
Question 2: My husband and I have a SMSF. There are only two trustees. What happens to the fund if one of us dies? Is it frozen until probate is granted, or can transactions go on as per normal? If there is a binding death benefit nomination, does it still require a lawyer?
Answer: Death does not stop the fund from operating (assets are not frozen, and probate doesn’t impact the fund). The trustee can continue to operate the fund as normal. However, If there were individual trustees, the law requires that there must be two trustees. So if one of you dies, you will need to appoint another trustee (normally, the deceased’s legal person representative (i.e. their Executor).
If the deceased had made a binding death benefit nomination, the Trustees can arrange to pay out the benefits in accordance with those instructions. As long as it has been correctly executed, it does not require a lawyer.
Question 3: What is the main difference between WQG and WCMQ?
Answer: Both WQG and WCMQ are listed on the ASX and have the same underlying investment portfolio using the Quality Global Growth Investment Strategy which is managed by WCM Investment Management.
WQG is a listed investment company. WCMQ is an open-ended managed fund.
As a listed investment company, WQG is effectively close ended. Directors determine the dividend. The price at which the shares trade on the ASX is independent of their underlying value – and so they can trade a premium or discount to their net tangible asset value (NTA). Currently, they are trading around a 13% discount to NTA.
On the other hand, WCMQ is an open-ended managed fund that uses a trust structure. By law, the Manager must distribute all the income the trust receives. WCMQ has “market makers” that try to ensure that units on the ASX are trading around NTA. When an investor buys units, this generally leads to the creation of new units and the size of the fund expands. When an investor sells units, this generally leads to the redemption of units and the fund contracts.
For disclosure, I am a Director of WQG.
Question 4: When does BHP go ex-dividend? If I take my dividend through the DRP (dividend re-investment plan), how does the price of the shares get determined?
Answer: BHP will pay a fully franked final dividend of US74c (approx. A$1.10 per share). It will trade ‘ex-dividend’ on Thursday 12 September, so the final date to buy BHP shares and receive the dividend is COB Wed 11 September. The dividend will be paid on 3 October.
If you want to participate in the DRP, or change an existing election, you must notify the registry by 5.00pm on 16 September.
The purchase price for the shares under the DRP won’t be known until after 3 October. BHP will buy the shares to be issued under the DRP on-market (i.e. on the ASX), but won’t start buying until after the payment date of 3 October.
