Forum Archive Index - June 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Any other BHP Billiton shareholders out there?

For those who don't know what I am talking about, a huge wad of mail 
detailing the demerger of BHP Steel form the parent BHP Billiton 
company arrived in the post last week.

The basic deal is that if you do nothing, as a BHP Billiton 
shareholder you will get one BHP Steel share for every five BHP 
Billiton share your own.   Of course the market price of BHP Billiton 
will adjust downwards to reflect this 'free' distribution of shares 
when this happens.

If you look under section 7.5 of the scheme booklet there is a 
section entitled 'New Zealand Resident BHP Billiton Limited 
Shareholders'.   Apparently Chapman and Tripp (Barristers and 
Solicitors, New Zealand) have formed the opinion that:

"individual New Zealand resident BHP Billiton shareholders will be 
required to include the amount of the Capital Reduction in their 
income tax return as gross income.  No credits will be available to 
offset the income tax in respect of the capital reduction."

This seems an odd view to me, especially as in Australia (section 
7.2.2):

"The return of capital by BHP Billiton shareholders from its 
share capital account will not be treated (in whole or part) as a 
dividend for Australian tax purposes.  In this regard the BHP 
Billiton Limited has sought and obtained a class ruling form the 
Australian tax office which confirms the treatment as a return of 
capital."

As I understand it, there is no big cash payout on the way to BHP 
Billiton shareholders.  The capital return takes the form of one jar 
of jam  (a combined BHP Billiton and BHP Steel brew) turning into two 
separate jars fo jam (one jar containing pure BHP Billiton, the other 
pure BHP Steel).   However, there is no more jam.  It has just been 
repackaged into different jars.   

So what are Chapman and Tripp talking about?   Under what section of 
New Zealand income tax law does this tax liability exist?   And how 
am I going to raise the money to pay this tax when it would seem I 
am to receive nothing at all?

SNOOPY



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