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Description - Forms of Income from Share Investments
A company may from time to time issue bonus shares to its shareholders, usually at a predetermined ratio, such as one bonus share for every ten shares held.
When a bonus is issued, shareholders may receive from the company:
- a FAST statement, issued under the Australian Stock Exchange electronic clearing house system 'CHESS'
- additional share certificates (or scrip), and
- a 'Share Holder Dividend Statement'.
Dividend reinvestment schemes
Dividend reinvestment schemes include the following:
- dividend election scheme,
- bonus share plan,
- share election plan,
- dividend investment plan, and
- dividend bonus plan.
Under these schemes, a shareholder may arrange for the company to automatically:
- reinvest part or all of each cash dividend in the purchase of additional shares, or
- issue additional shares directly in lieu of dividends.
Share splits and consolidations
The following table describes share splits and consolidations.
Occurs when a company...
Divides its shares into a larger number of shares of lower value. For example, one share becomes three.
Converts its shares into a smaller number of shares of higher value. For example, three shares become one.
Company employee share plans or schemes
A number of companies have employee share plans or schemes, which provide the opportunity to share in the ownership and profits of the company.
There are generally two types of share plans offered:
- a scheme administered by the company itself where, subject to special terms and conditions, employees may obtain shares directly from the company, or
- an arrangement where shares are issued to a trustee and held on behalf of company employees until specified conditions are met.
Assessment company employee share plans
Shares from company employee plans or schemes are exempt from income and assets testing as they are not financial assets of a pensioner until the pensioner becomes the legal owner by paying for the shares in full. When the pensioner becomes the legal owner the shares are treated in the same manner as ordinary listed shares.
In a few exceptional circumstances, dividends from employee share plans or schemes are assessed as income if it is quite clear that under a particular plan, they are paid directly to the pensioner.