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Burt(Newbie)Newbie
9 Jan 2024

Hi All


First ever post so please excuse any noob errors.


I work for a private company that issued me share options a while back. The options will expire in about 2 years time and it is unlikely that the company will go public before then. My plan was to exercise the options as late as I can.


Now, colleagues of mine have spoken to a couple of Aussie accountants and been told that they will be subject to CGT if they exercise the options. At this time the options have no real value (as the company is not public) and the grantee has not made any profit (or loss) from the shares.


I was always under the impression that you would pay CGT if and when you profited from the sale of the shares. If this is true I may not be able to afford to purchase my own share options. Can anyone shed more light on this for me please?

3,472 views
3 replies
3,472 views
3 replies

Most helpful response

Most helpful replyATO Certified Response

CaroATO(Community Support)Community Support
ATO Certified Response11 Jan 2024

Hi @Burt,


You need to actually own the asset for a minimum of 12 months before you look at the 50% CGT discount.


To work out if you made a capital loss or gain there're several steps you need to follow.


When you sell your options a CGT event will be triggered. You might need to pay tax at your nominal tax rate.


Have a look at the reply another community member received. It's got a link to an awesome flow chart that may help with other questions you have.

All replies

Burt(Newbie)Newbie
10 Jan 2024

Thanks all. I think I found my answer. Essentially, I will be subject to the tax on the "spread" which is The Fair Market Value (what the " assumed" value is) - The Strike Price (the price I am offered the options at). It's crazy to be taxed when you haven't made any income yet, but it seems to be a law here and in the US.


Ok, so now I have other questions if anyone knows the answers


  1. If I found a way to pay the huge tax when acquiring the options and hold them for more than 12 months before selling them, do still I qualify for the 50% tax discount? How does this work, if I have already paid tax when they were acquired? Is it a rebate in the following year? If so, is it all at once or at a specified smaller limit for subsequent tax years.
  2. If I pay tax on the fair market value and the company eventually goes public. Then, I sell when I am allowed to but at a loss. Does the ATO consider this a capital loss? And can the be deducted from tax returns in subsequent years.
  3. If I pay tax on the acquired options do I pay tax a second time when I sell them? Would this be almost 75% tax in total at the highest income threshold?


TL:DR don't work for startups unless you are already very wealthy :)



Most helpful replyATO Certified Response

CaroATO(Community Support)Community Support
ATO Certified Response11 Jan 2024

Hi @Burt,


You need to actually own the asset for a minimum of 12 months before you look at the 50% CGT discount.


To work out if you made a capital loss or gain there're several steps you need to follow.


When you sell your options a CGT event will be triggered. You might need to pay tax at your nominal tax rate.


Have a look at the reply another community member received. It's got a link to an awesome flow chart that may help with other questions you have.

Burt(Newbie)Newbie
6 May 2025

Hi Caro,


My apologies for the late reply. I must have missed the notification that I had received a response to the query. Just wanted to say "Thanks".


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Will I be required to pay CGT when excercising share options on a company that has yet to go public? | ATO Community