DSSP - Dividend Substitution Share Plan

[sydboy007]

Does anyone have experience with these?

I have some shares in AFI and they have just started to offer a DSSP.

The main advantage I can see is that the new shares issued are do not attract income tax, but will be liable for CGT on sale. Should you be lucky enough to have shares pre CGT then the newly issued shares are also CGT exempt, though you could run into avoidance issues should you sell the new shares immediately upon receiving them.

The downside is you do not receive the franking credits, but considering my tax rate is above 30% I would be gaining slightly from that.

Am I missing anything important

 

[drsmith]

Sounds like one of those old share purchase plans from the 90's. With those, the new shares didn't add to the cost base for CGT purposes either.

For fully franked dividends, it's obviously not worthwhile if your marginal tax rate is equal to or less than the corporate rate. If it's more, then it's debatable at best with the question being how much CGT you pay when you sell. That's obviously hard to know so I would only consider these plans worthwhile for unfranked dividends unless your mix of tax and income support has you in a particularly high EMTR.

 

[dave39]

I signed up for AFI DSSP for my SMSF holdings which are only taxed at 15%. The issue with me is that after the GFC my SMSF is sitting on a large capital gains loss so getting DSSP share which are essentially bonus shares issued at no cost, lowers the cost base of your holdings and thus increases the capital gains when you sell, which for me is a better way to go as it will use up capital losses.

I am surprised that more LICs and major companies don't offer DSSP as an option.