Often a company will offer you shares instead of receiving a cash dividend. Assuming you still like the stock (if you don't, then why haven't you sold it?) I always take the shares. The exception could be if I think valuations are crazy and there are other stocks with much better valuations to buy. Then I'll take the cash.
By taking shares you save on brokerage, likely very saving but further often times a dividend is not enough to actually reinvest economically. My brokers minimum of R100 brokerage for a trade at 0.5% means that I need to do a R20k trade to get an effective 0.5% brokerage. Sure I can save up the dividends or add them to other cash I may have in the account - but taking the shares is easy and brokerage free.
For tax purposes the free shares reduces your base cost price as the new shares come in at zero cost, so you have same total base cost but extra shares effectively meaning average purchase price is now lower. When you sell this new lower base cost will be used for tax purposes.
However you'll save a little on tax as DWT is 20% (this is what you would have paid on the dividend) and maximin CGT is 18%.
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