A Dividend Reinvestment Plan (DRP) allows shareholders to automatically reinvest their cash dividends into additional shares or ETF units — instead of receiving the dividend as cash. DRPs are offered by many ASX-listed companies and some ETFs, and are a popular mechanism for compounding investment returns without paying brokerage on each reinvestment.
How DRPs Work
When a company or ETF pays a dividend and you are enrolled in the DRP:
- Instead of cash being paid to your bank account, the equivalent dollar amount is used to purchase additional shares
- The new shares are typically issued at a small discount to the market price (for companies) — or at the prevailing market price (for ETFs)
- No brokerage is charged on DRP shares
- The new shares are added to your holding, registered under your CHESS HIN
This mechanism allows dividends to be automatically compounded — buying more units which then generate their own future dividends.
DRP for ASX-Listed Companies
Many major ASX-listed companies offer DRPs, including:
- CommBank (CBA)
- BHP Group (BHP)
- National Australia Bank (NAB)
- Westpac (WBC)
- ANZ Banking Group (ANZ)
- Woolworths (WOW)
- Telstra (TLS)
You enrol in the DRP directly with the company’s share registry (Computershare, Link Market Services, or similar). Enrolment deadlines typically fall before each record date.
DRP for ETFs
Some ASX-listed ETFs offer a distribution reinvestment plan. Notable examples include:
- Vanguard ETFs (VAS, VGS, etc.): Vanguard ETFs offer a DRP — distributions can be reinvested into additional units at net asset value (NAV) with no brokerage
- BetaShares ETFs (DHHF, NDQ, etc.): Some BetaShares ETFs offer a DRP
ETF DRP enrolment is typically done through the ETF provider’s registry or through your broker.
Tax Treatment of DRP Shares
This is the critical point for Australian investors. Even though you receive additional shares (not cash) under a DRP, the dividend is still taxable in the year it is paid:
- The dividend (or distribution) is included in your assessable income in the financial year it is paid
- If the dividend carries franking credits, you can offset these against your income tax as normal
- The cost base of the DRP shares is equal to the value at which they were issued (the market price or discounted price)
This means:
- You have a tax liability in the year the DRP shares are issued (even though you didn’t receive cash)
- When you eventually sell the DRP shares, CGT applies based on the cost base established at the time of the DRP issuance
- Each DRP parcel is a separate CGT parcel with its own purchase date and cost base
DRP vs Cash Dividend — Comparison
| Factor | DRP | Cash Dividend |
|---|---|---|
| Brokerage | None | Reinvestment incurs brokerage |
| Cash received | None (fully reinvested) | Full dividend amount |
| Tax in year of dividend | Still taxable (dividend assessable) | Still taxable |
| record-keeping | Each DRP parcel = separate CGT event | Simpler — one annual investment record |
| Fractional shares | Often available via DRP | N/A |
| Discount | Sometimes offered (company shares) | N/A |
| Compounding | Automatic | Manual (reinvest yourself) |
When DRP Makes Sense
DRP can be appropriate when:
- You don’t need the dividend income as cash
- You want automatic compounding without brokerage costs
- The DRP discount (if any) provides a marginal benefit over market price
- You have the record-keeping capacity to track multiple small CGT parcels
DRP may be less appropriate when:
- You need cash from your investments (e.g., living off dividends in retirement)
- You prefer to rebalance your portfolio manually using dividends to purchase a different asset
- You find the multiple small CGT parcels administratively burdensome
Related Articles
- ETF Distributions and Tax
- ETF Tax Australia
- How to Open a Brokerage Account
- Franking Credits Explained
- Share Trading Platforms hub
Frequently Asked Questions
Is DRP available on all Australian shares? No. DRP availability depends on the company or ETF issuer. Check the share registry or the company’s investor relations page. Many large ASX companies offer DRP; smaller companies may not.
Do I pay brokerage on DRP shares? No. DRP shares are issued directly by the company or ETF — no brokerage is charged. This is the primary financial benefit of DRP over manually reinvesting dividends.
How do I enrol in a DRP? Contact the company’s share registry (e.g., Computershare or Link Market Services) with your HIN and SRN (Shareholder Reference Number). Many registries allow online DRP enrolment. For ETFs, contact the fund manager’s registry or your broker.
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.