DRP vs DSSP: how dividend reinvestment is taxed in Australia

Being in a dividend reinvestment plan is the easiest way to grow a holding without lifting a finger. It's also one of the easiest ways to end up with a share count that doesn't match your records, because every reinvestment adds shares you never bought through your broker.

Here's how DRPs and DSSPs are taxed, and how to set them up in Summ so your numbers line up.

What's a DRP?

A dividend reinvestment plan (DRP) lets you take your dividend as new shares instead of cash. The company pays the dividend as normal, then uses it to issue you new shares, often at a small discount. Anything left over that doesn't buy a whole share usually carries forward to the next dividend.

You join through the share registry (Computershare, Link or Automic), not your broker, and once you're in it usually applies to every dividend until you leave.

What's a DSSP?

A dividend substitution share plan (DSSP), sometimes called a bonus share plan, looks the same from the outside: new shares instead of cash. The difference is that you give up the dividend, and the company issues you bonus shares in its place.

Fewer companies offer a DSSP, and some offer both and let you choose.

How they're taxed

They look alike, but they're generally taxed differently.

Question	DRP	DSSP
Is it income?	Yes. It's assessable income in the year it's paid, the same as a cash dividend, franking credits included	Generally no. No dividend is paid, so there's no dividend income
Cost base of the new shares	The amount you reinvested	Generally treated as bonus shares, so your existing cost base spreads across the old and new shares
Parcel	A new parcel, bought on the date the shares were issued	Generally treated as part of your original holding

How this applies to your own holding is a question for your tax agent.

Why it matters at tax time

Ten years in a DRP at two dividends a year is twenty extra parcels, and none of them show up in your broker history. Each one needs its own cost base when you sell. Miss them and you'll either overstate your gain or leave dividend income out of the year it was paid.

How to set up a DRP or DSSP in Summ

Once Summ knows a holding is in a plan, it handles the reinvestment for every dividend. Setting it up takes a minute:

1. Open the holding. Go to the asset detail page for the share or ETF.
2. Open Dividend reinvestment. Choose whether your dividends were reinvested, and for what dates. If you joined or left the plan partway through, set a date range.
3. Pick the plan type. If the company offers both, choose DRP or DSSP. DRP is the default.
4. Save. Summ applies the plan to every dividend in that period. For a DRP it records the income and adds the new shares as a new parcel. For a DSSP it adds the new shares without recording dividend income.

You can change the plan any time from any dividend in your transaction list, using Manage dividend reinvestment.

Fixing a single dividend

Sometimes one dividend doesn't follow the plan. Maybe you took one payment in cash, or it's an older dividend Summ doesn't have an issue price for.

Open the dividend in your transaction list and you'll see whether the plan covers it. Enter the shares you received and the issue price from the registry's payment advice, or switch that one dividend between reinvested and cash. Reset puts it back on the plan.

Get your reinvestments right

Summ supports Australian and US shares and ETFs alongside crypto. Import your broker history by CSV, dividends and franking credits are added automatically, and once your DRP or DSSP is set up, every reinvestment lands as its own parcel.

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Frequently asked questions

Is a reinvested dividend taxed if I never got the cash? Under a DRP, generally yes. It's income in the year it's paid, whether it arrives as cash or shares.

Where do I find my DRP details? On the registry's payment advice for each dividend. It shows the dividend, the shares issued, the issue price and any balance carried forward.

My broker shows more shares than I bought. Is that my DRP? Often, yes. DRP shares come from the registry, so they usually aren't in your broker export. Setting up the plan in Summ adds them.

Does this work for ETFs? Distribution reinvestment plans work much the same way and are set up from the same Dividend reinvestment drawer. The tax side of an ETF distribution comes from its AMMA statement, which our AMMA guide covers.

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This article is general information about how dividend reinvestment plans are usually treated under Australian tax rules and how Summ records them. It is not tax, financial or legal advice, does not take your circumstances into account, and should not be relied on to work out your own tax position. Speak to a registered tax agent about your own holdings.