1. What are your thoughts on investing in the current Sydney Airport (SYD) Entitlement offer? Is it worthwhile? Alternatively, if we sell our entitlements on the ASX, how do you expect the capital gain to be treated on the entitlements? I assume the cost base of these entitlements are zero dollars, would we pay tax on the full sale price?
Prima facie, you are mad if you either don’t exercise your rights and buy new shares in Sydney Airport at $4.56 or sell your renounceable rights on the ASX by Wed 26 August. Today, the shares closed at $5.40 and the rights (trading under SYDR) at $0.82. If you do nothing, there is a retail shortfall bookbuild, which will give you some payment at the back end of September.
I am not a huge fan of Sydney Airport at the moment (I don’t think the market is pricing in the long term competition risk from Western Sydney Airport and is potentially underestimating the challenges in getting people to fly again), so I would probably sell the rights. But I am in the minority on this – the issue has been very well supported.
Yes, if you sell the rights, the amount will be considered to be a taxable capital gain (on the whole amount – no discount).
2. Is the ANZ interim dividend fully franked?
Yes, this was the “surprise” part of the announcement. ANZ had previously said that their dividends would only be about 70% franked because of their NZ and Asian businesses. But because the dividend has been cut back so much to just 25c, they are now able to fully frank it.
3. I do all my share trading through CommSec. Could you please explain the relevance at the close of trading, why there is a buyer at $37.39 and a seller at $31.36?. Prior to this, the stock was trading around $34.13.
The ASX uses a single price auction to determine where a stock “closes”. This auction occurs very close to 4.10pm (it occurs randomly). It uses the same formula when a stock opens in the morning.
At 4.00pm, the market stops trading and goes into an ‘adjust’ phase where no trading occurs, prior to a ‘closing’ phase around 4.10pm.
The formula is a bit complicated, but essentially, it is the price where buyers and sellers match – that is, the price after all overlapping bids and offers have been matched out. Importantly, all buyers and sellers receive the one single price, notwithstanding whether they have bid or offered a different price.
Back to your example, someone wanting to buy at $37.39 really wants to buy. He/she could pay as much as $37.39, but probably expects to pay considerably less. By sticking in such a high price, they are making sure that they are at the top of the buying queue.
Using the same example, someone wanting to sell at $31.36 really wants to sell. He/she could receive as little as $31.36, but probably expects to receive considerably more. By sticking in such a low price, he/she is making sure that he/she is at the top of the selling queue.
Both parties will trade because the prices overlap. The price they will receive will be somewhere in between and depend on all the other buyers and sellers.
Usually, but not always, the closing price will be fairly close to the last traded price at 4.00pm.
4. My wife and I are both over the age of 65 and both in pension phase. We have approximately $1.5m in the fund. The fund is principally invested in shares on the ASX. We are thinking of purchasing a commercial property for about a $1m. Will it cause an issue with the ATO in regard to diversification if we purchase the property inside our SMSF as our biggest investment will be property? Secondly, if we withdraw the money from our super fund and buy the property in a unit trust, will the withdrawal cause an issue with the ATO?
I assume that you will need to sell $1m of shares to purchase the property. That will mean that your SMSF will have $0.5m in shares, and $1.0m in a single commercial property. It doesn’t look like ‘diversification’ to me. I suspect that you would have trouble satisfying your SMSF auditor as well (the ATO, if they enquire, might ask the Auditor to confirm that he/she is satisfied).
Regarding the second option. You are both over 65 – you can make a withdrawal from super for any reason at any time.
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