Restricted stock units (RSUs), employee share plans and options
Paid partly in shares? Let's make the tax make sense.
If your employer pays you partly in shares, through restricted stock units (RSUs), an employee share scheme or a share purchase plan, you've probably had at least one moment of "wait, I owe tax on what?" I'll work out what you actually have, when it gets taxed, and what it means for your return, in plain English.
One fixed fee, agreed in writing before I start.
- "How are my restricted stock units (RSUs) actually taxed?"
- Your plan is run from an overseas head office, so the statements don't look like anything the ATO asks for.
- You're not sure whether to sell when they vest.
- Your last accountant never really answered your questions.
"How are my restricted stock units (RSUs) taxed?"
Your shares or rights come under what the ATO calls an employee share scheme (ESS). That covers shares, and rights to acquire shares, whether they come from an Australian or a foreign company, and whether your job is in Australia or overseas.
It goes by different names depending on your employer: restricted stock units (RSUs), an employee share purchase plan (ESPP) where you buy shares at a discount through your pay, options, or performance rights. I see a lot of these from global tech companies and the big oil and gas employers, where share plans are a large part of the pay.
The part that's taxed as income is the discount: the difference between what the shares were worth and what you paid for them. With RSUs you often paid nothing, so the discount can be the whole value.
When the tax actually hits
There are two kinds of scheme. In a "taxed-upfront" scheme, you're taxed on the discount in the year you get the shares. In a "deferral" scheme, if you and the scheme meet certain conditions, the tax is pushed back to a later point. Which one you're in should be set out in the scheme rules or a letter from your employer.
For a deferral scheme, that later point is broadly the earliest of a few events, such as when there's no longer a real risk of losing the shares and you're free to sell them, with an outer limit of 15 years for interests acquired from 1 July 2015. Leaving your job doesn't, on its own, trigger the tax any more. That one catches people out, in both directions.
This is why I start by reading your plan documents, not by guessing from the name of the plan.
"Should I sell when they vest?"
I'll explain the tax side of each choice clearly, so you know what selling straight away, or holding, does to your return.
One rule matters most here. For shares in a deferral scheme, once the deferred taxing point passes they are treated as bought again at their market value at that moment. That resets both their cost and the date that counts towards the capital gains tax discount, so the clock for any later sale starts then, not when you were first granted them.
Whether to keep a large holding in your employer as an investment is a question for your financial planner. I'll make sure they're working from the right tax numbers.
The paperwork, and when it's missing
Your employer should give you an employee share scheme statement showing the discount for the year. If the shares come from a foreign employer, you might not get one, and the details can come in writing instead.
In practice, that often means a broker portal in a foreign currency, vesting schedules, a few sales to cover tax withheld overseas, and no Australian statement at all. Send me what you have. I'll match it up, convert it, and tell you plainly if anything's missing.
How I work with you
- You send an enquiry with a line or two about your shares and your job.
- I reply personally and ask only for the documents that matter: the plan rules, the vesting history, any statements.
- You get a fixed fee in writing before I start.
- I prepare the return, explain what your shares did to it, and you approve it before I lodge.
- If you'd like, I keep looking after it each year, with a planning session before 30 June so the next vest isn't a surprise.
"I have complete confidence in his ability to handle complex taxes and ensure they are done accurately and timely. Overall great communication skills."
Gaby D
Google ReviewRSU and employee share scheme questions
The employee share scheme rules can apply to shares from a foreign company, and to work done here or overseas. What usually changes is the paperwork: foreign currency figures, overseas tax withheld, and no Australian statement. That's the part I sort out.
That's common. The cost of each parcel can often be rebuilt from the broker history and the vesting records. I'll tell you what I can and can't reconstruct before I charge you anything.
I explain the tax result of each option. The investment decision itself is yours, ideally with your financial planner, and I'm happy to work with them.
Yes. I scope it from your documents and agree a fixed fee in writing before I start.
Got shares from work and questions nobody's answered?
Tell me about your plan and your situation. I'll reply personally with what I'd suggest and a fixed fee.
Send me an enquiry