Dividend reinvestment plans and tax

• Declare the dividend, and its franking credit, in the year it was paid.
• Each batch of new shares costs the dividend used to buy it, and dates from the day it was issued.
• Keep every DRP statement. You need them to work out the gain when you sell.

A dividend reinvestment plan (DRP) lets you take your dividend as more shares instead of cash. The shares are often issued at a small discount to the market price, and with no brokerage. ETFs offer the same thing for distributions, usually called a distribution reinvestment plan.

You join through the share registry, holding by holding. Some plans let you reinvest part of the dividend and take the rest as cash. Any amount too small to buy a whole share is usually carried forward to the next dividend.

The ATO's own example: Natalie owns 1,440 shares. The company declares a dividend of 25 cents a share, so $360. She chooses the DRP and on 20 December 2025 gets 45 new shares at $8 each.

• She declares the $360 dividend in her 2025–26 tax return, plus any franking credit.
• For capital gains tax, she bought 45 shares on 20 December 2025 for $360.

Reinvesting doesn't change how the dividend is taxed, so you may owe tax on income you never saw as cash. Franking credits still come with it. See franking credits explained.

Every batch of DRP shares is a separate purchase with its own cost base and its own date. After ten years of half-yearly dividends, one holding can be made up of twenty or more purchases.

• Cost base: the dividend used to buy the shares. A discount on the issue price doesn't add to it.
• The 12 months: count from the day the shares were issued. Shares from last month's DRP don't get the CGT discount if you sell them now, even if the rest of the holding does.
• Which shares you sold: when you sell part of a holding, the gain depends on which purchases the sale used. Your records need to identify them. See cost base of shares.

• Each DRP statement from the registry: the date, the dividend, the shares issued and their price.
• Any balance carried forward, so the next statement adds up.
• Your holding statements, to check that your own records match the registry's unit count.

Is a DRP better than taking cash?

It depends on your situation, and this guide can't tell you. It saves brokerage and keeps your money invested, but the tax is the same and the record keeping is heavier. Try both in the free dividend calculator, which can switch a DRP on and off.

Are bonus shares the same?

Not always. Where you could choose cash or shares, the shares are treated as a dividend, as with a DRP. Other bonus shares can have different rules, so check the company's notice.

What if I forgot to record my DRP shares?

Your registry can send past statements. Add each one as a purchase on its issue date, then check the total units against your latest holding statement.

In Portfoli.au, record each DRP allotment as a purchase: the units issued, the issue price, and no brokerage. It then keeps its own date and cost base, counts towards the 12 months on its own, and is matched correctly when you sell. Dividends are estimated from each ex-dividend date; they don't add DRP shares for you, so a holding's units only change when you record them.

How to add a purchase, or start free.

• ATO, Dividend reinvestment plans (updated 22 June 2026)
• ATO, Investments in shares and units (Guide to capital gains tax 2026)

Check with a registered tax agent before you act.

• How ETFs are taxed in Australia: Distributions, the annual tax statement, cost base changes, and selling units.
• Franking credits explained: What franking credits are, how a dividend is grossed up, refunds, and the 45-day rule.
• Capital gains tax on shares in Australia: When you pay tax on selling shares or ETFs, how the gain is worked out, and what to do with a loss.
• How to track your share portfolio in Australia: The records to keep, a spreadsheet or a tracker, and the figures worth watching.
• All guides, and help with using Portfoli.au.
• Capital gains calculator: work out the gain on one sale, free.
• Dividend calculator: estimate dividend income with franking credits, free.