Employee share schemes (ESS) are an effective way of providing benefits to employees who perform well but they also come with a tax bill.
Employee shares act as an incentive to improve performance. But, depending on the scheme your employer set up, either non-concessional or concessional, there are different taxing points and reductions available. Knowing to include these assessable amount in your income tax return in the correct time period is essential. The vesting date of ESS can sometimes be years after the options were first provided and at that point you may have forgotten you even had the shares or that you have to pay tax.
The tax complications continue after vesting as well. If the share price of the company has vastly increased, shares provided to you at nominal value may now be worth in the thousands of dollars. If shares are sold or transferred, this may trigger a costly CGT event. In addition there is the taxation of dividends along the way that need to be considered. A further complication arises if your company is bought out by another company, and you are offered different shares- are you required to pay tax on the unintentional disposal? Will you receive a higher cost base on the new shares? These are all questions that the solicitors at Waterhouse Lawyers can assist you with.
If you are unsure about your ESS shares, please contact us.