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Corporate actions – return of capital

A Return of capital refers to payments back to shareholders, partners, or unit holders that exceed the growth (net income/taxable income) of a business or investment. Unlike a dividend or bonus share issue, which reflects a gain or loss on an investment, a return of capital is a return of some or all of the initial investment, and reduces the investment. A return of capital shrinks the equity of the company, transferring value from the company back to its owners. As it reduces the equity of the company, and therefore the value of shares, a return of capital is not taxed in the same way dividend income is taxed. It is vital to enter it correctly in order that the correct rate of taxation applies and the value of your holding is adjusted appropriately.

To record a return of capital, click CORPORATE ACTIONS on the ASSETS menu, then RETURN OF CAPITAL.

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