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MBD(Initiate)Initiate
31 Jan 2023

Hi,


Just wondering if anyone can help me with this.


I have an option to contribute up to 10% of my salary to purchase company shares (ASX listed), and the company will match it 1:1, as long as I hold it for 3 years.


I am unsure how the taxation works in this case - Let's say if my base salary is $100,000, and I purchased all 10% ($10k shares and received $10k matched shares), and assuming I sell my shares 3 years later at exactly the same price, do I record:


1) $110k ($100k + 10k matched shares) in the current year


2) $90k taxable income ($100k - $10k contribution) in the current financial year

And $20k additional taxable in come in the year I sold it ($10k+$10k matched)


Please if anyone can advise me that would be much appreciated.





5,182 views
6 replies
5,182 views
6 replies

Most helpful response

Most helpful reply

AriATO(Community Support)Community Support
8 Feb 2023

Hi @MBD


If they vest in 3 years it's likely a tax-deferred scheme but check with your employer which scheme it is. They will also tell you about the conditions and when the deferred taxing point is.


If it's tax-deferred then you pay tax on the discount you got for owning the interests when the deferred taxing point happens. For instance, if they gave a share at no cost and the market value was $10 then your discount for one share is $10. You'll declare this $10 in your return in the same financial year as the deferred taxing point.


Have a read about the deferred taxing point on our website. ESS does get a bit more complex. You might want to get professional advice before you decide it's right for you.

All replies

AriATO(Community Support)Community Support
3 Feb 2023

Hi @MBD


Is it shares in the company you work for? Can you tell me if its an employee share scheme?

MBD(Initiate)Initiate
3 Feb 2023

Hi Ari,


Correct, it's an employee shares plan - the shares in the company I work for. The contribution I believe comes from my pre-tax salary.


To clarify the shares vest in 3 years (I may lose it if leave the employment, or sell it before 3 years).

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