Hi fellow ozbargainers.
I work for a big company who have given us 1,000 shares into the company. They said we can sell the shares in August and will recieve the money for the shares into a nominated bank account or we can keep the shares.
I'm wondering what are the tax benefits to keeping the shares and selling them down the track. I can't seem to find anything online about this.
Thanks
Yes they do pay dividends. I'm wondering if I keep the shares for over 1 year and I eligible for the CGT discount?
What you pay tax on
If you sold assets during the year, such as property or shares, you need to work out your capital gain or loss for each asset.
When you sell an asset for:
more than it cost you – you have a capital gain
less than it cost you – you have a capital loss.
You pay tax on your net capital gains. This is:
your total capital gains
less any capital losses
less any discount you are entitled to on your gains.
There is a capital gains tax (CGT) discount of 50% for Australian individuals who own an asset for 12 months or more. This means you pay tax on only half the net capital gain on that asset.
But in this instance they are given to us, so would the bought date essentially be the day we recieve them?
@mayo88: Did you pay anything at all to get it? That matters too. If stock is $20 now and they gave it to you for free, you are essentially getting $20 in taxable income. If you sell, you pay tax on the capital gain or accumulate capital loss. If you hold for a year, the usual rule applies for capital gains
@mayo88: Then expect to pay extra marginal tax this FY, irrespective of whether you sell later or not. If you sell, pay more taxes in the gains or save the losses for FY tax returns.
@soan papdi: it'll likely be next fin year, if it's not possible to sell until august then that's the deferred tax date. But yeah, it'll be due whenever that date rolls around on the value of the shares either way. Any capital gains will be based on that value then.
@freefall101: is three months the window to sell and consider the grant+sale is on the same day? I was under the impression it’s one month
Thanks, Yes im on the website at the moment.
I can't find anything on there if I hold the shares for over a year will I be eligible for a CGT discount?
You would also receive an ESS statement which will show what you will need to declare in your tax return. Once the shares are vested in August, you can do whatever you wish too. If you hold for greater than 12 months, you will receive the benefit of discount capital gain. You cost base will be the value of shares shown on the ESS statement plus any holding expenses.
If it's a blue chip company, elect to reinvest the dividend and come back in 30 years time to enjoy some 'flash money' as detective Axel Foley would put it.
Which ASX bluechip stays listed for over 30yrs that's still around and appreciated in value ?
Wesfarmers, listed 1984.
Banks?
CSL and a lot of company don't exist not because they went bust, they just merge or get take over and assume a different identity
so, your money still there and growing
Microsoft taken over countless business, you either get share in Microsoft or you get cash, you have the option to buy Microsoft if you want
Your company will tell you about this, they’ll provide some info. Well, Telstra did for me.
Best to ask an accountant for such advice. I am not an accountant, but here's my understanding (which can be wrong). Assuming that it's ESS (Employee Share Scheme) and the shares were given you as a bonus. Also assume that 1,000 shares would be worth $10,000 this August (which would be the end of vesting period I presume). Another assumption is that your company is traded on a public exchange and you can sell your shares easily.
In August, $10,000 worth of shares can be vested, i.e. you take full control of the share. That means you are hit with $10,000 of capital gain without discount, regardless whether you want to keep the share or sell it.
If you decide to sell the shares, and on the day the share price goes up and you ended up selling it for $11,000. Your total capital gain would be $11,000 in the next financial year (FY2024).
If you decide to keep the shares, you'll have $10,000 capital gain in the next financial year (FY2024). Your company is on the rise and 3 years later you decided to sell the shares at $18,000. That means in FY2027 you'll get another $4,000 capital gain after the discount (($18,000 - $10,000) / 2).
Either way, in Australia having ESS vested might cause issues because it triggers a capital gain event. Yeah, talk to your accountant.
When’s Ozbargain going public? I’m waiting.
ozbcoins is the next multibagger , get in fast !
Because of the CGT issues Scotty talks about, lots of employee share schemes in Australia are structured differently to the way he describes.
Many involve loans, options or other derivatives.
Best to ask the work people about it, they will have a scheme booklet or similar with an faq.
"That means you are hit with $10,000 of capital gain without discount".
It's actually considered income rather than capital gain. The difference is that you cannot offset income with a capital loss.
"If you decide to keep the shares, you'll have $10,000 capital gain in the next financial year (FY2024). Your company is on the rise and 3 years later you decided to sell the shares at $18,000. That means in FY2027 you'll get another $4,000 capital gain after the discount (($18,000 - $10,000) / 2)."
That's right, except the initial $10,000 is income rather than capital gain.
Now my advice to OP: ** Sell the shares within 30 days **
Here's why: If you keep the shares, and the price goes down from $10 to $5, you will have a tax bill on $10,000 income but your shares will only be worth $5000.
(30 day rule: https://www.ato.gov.au/general/employee-share-schemes/in-det… )
Thanks for the clarification.
If you keep the shares, and the price goes down…
That was exactly what happened in my last job. Ended up having to sell a big chunk of shares so I can pay the tax :(
Thanks for your reply guys! Much appreciated 👍
I can't seem to find anything online about this.
I hope your job isn't tech related if you're unable to find that information
Qantas?
IYKYK
The company would have given you a bunch of docs to read that looks like you have not read. Go and read the docs they gave you and as per the docs if you do not understand them seek financial advice from a professional.
What OP is saying is..
OP has been given 1000 shares as a thank you from some Irish man.
In august OP will receive the shares.
OPS boss has setup a by back that OP has to agree to in the next 7 days is they want to.
And OPs boss will buy back the shares at a reduced price, handle all the transfers etc and all OP has to do is click a button because it’s all been setup on some random shares company.
So does OP take the easy way out and click the button and take prob 3/4K and walk away
Or does OP hold on to the shares of about 6300 for the year
Nevermind the tax benefits, do you expect the shares to go up in value over time and do they pay dividends?