If someone owns some unlisted shares (e.g. from an Employee Share Scheme), and wants to sell them to a spouse, how is this done? What records should be kept for ATO purposes? e.g. Is there a standard/suggested form or, at the other extreme, is verbal agreement sufficient? References appreciated.
Thanks,
Roy
Your employer would supply the information when the shares were allocated. Contact the Share Registry of the Company for details on how to transfer.
Are you sure that the shares are actually unlisted?
Typically Employee Share Plan shares are held in trust for a period, and then able to be released as ordinary shares.
Selling the shares will trigger a Capital Gains Tax Event. So normal information such as dates, and prices on both both allocation and sell is required.
Thanks Baysew!!
Contact the Share Registry of the Company.
Will they be able to advise how to sell the shares to my wife? Do you just mean ask the finance person? It's a pretty small company…
Are you sure that the shares are actually unlisted?
Quite sure, quote from the board "we are an unlisted company"
Typically Employee Share Plan shares are held in trust for a period, and then able to be released as ordinary shares.
That's correct, that has now occurred as I have met the vesting criteria
normal information…is required.
For selling to my wife, can I just write this information on a piece of paper (or whatever), and file it away?
Ok So it's a unlisted company.
They will either outsource the registry function to companies like Computershare, Link or Boardroom etc.
They normal way to sell shares off-market is via a Standard Transfer Form. This is needed to record your wife as the owner. There maybe State Stamp Duty to pay, although some states do not charge this.
Otherwise they will do the registry function in house.
So contacting HR is probably the first step. Also look at the documentation you received with the shares.
For all taxation matters there needs to be a paper trail.
Unlisted company will be very unlikely to use a public registry unless they have a massive plan to manage, which seems unlikely.
There may be stamp duty, I don't know in QLD.
The real issue is likely to be CGT if you value the shares above a nominal amount. You will have a liability for the gain to the date of sale. But if you value them below the real value, the ATO may feel you are trying to avoid tax (by shifting them into a lower taxed person's ownership).
I would:
- ask the CFO or Company Secretary if this type of transfer has come up before, and how they handled it (assuming it is a small company).
- ask your tax accountant for their thoughts on how to handle it.
Thanks, I'll chase after a Transfer Form… Also, seems no applicable stamp duty in Qld if I'm reading this right: https://www.treasury.qld.gov.au/taxes-royalties-grants/dutie…
Thanks! Apparently (unfortunately) I need to pay tax at income tax rate (not CGT rate) on the full value of the shares when they vest to me (which is around now). Basically, ESS shares are treated as income. Now, I plan to sell them at that same value to my wife, hence no CGT gain or loss is payable, right? (after all, the shares neither increased nor decreased in value while in my possession, see?) When my wife sells, of course, that would then be a CGT event, with the cost base being the value at which I sold them to her.
Does that all check out with your logic?
PS Have asked the company and a couple of accountants, they are pretty useless so far, I'll spare you the details. Thanks for your 2c!
ESS shares are income. If you transfer them to your wife (dated transfer form lodged with the share registry) on the same date they vest at the same price/value they are (as per income value) there is a capital gain event with $0 capital gain, so no CGT payable.
Thanks, yeah that was my understanding. Do you know if the "transfer form" a standard form (URL?) or do I need to get a particular one from the company?
You need to get it from the share registry of the company. If they do not use a share registry you probably need to ask the company secretary (the one that lodges the Asic forms for the company)
Thanks maxi. I managed to get a hold of a "standard" transform form from the company, which I've lodged and they've received. Job done I guess (until tax return time next year…). :)
Here is some information from the ATO about what information should be on the records, but doesn't really say how the record should be created. Normally the records would be supplied by the company or whatever, but I feel a bit weird creating my own records for this purpose… should I?