Low-marginal-rate taxpayers, including pension funds and charities, have been disappointed by the results of the $1 billion Telstra share buyback announced this week. Unlike earlier off-market buybacks, including those by the major banks, BHP and RIO, the returns from participating in this latest buyback have been minimal.
As widely predicted, the return from selling into the buyback for a zero-rate taxpayer was only 3 percent after taking into account the value of the $2.27 per share franked dividend component of the final $4.60 per share buyback price. Worse still, except for holders of 1300 shares or fewer, there was a 70 percent scale-back of the number of shares accepted in the buyback.
In dollar terms, the buyback price including the value of the franking credits was $5.57 per share, only 17½c per share above the Telstra share price of $5.40 when the result was announced to the market.