Company Issued Shares Value & CGT Calculation

[#1]

Hi,

I have a couple of questions relating shares I receive from my employer.

Each financial year I receive two types shares:

Shares issued at an end of financial year allocation to all staff. This is for a set dollar amount, with the number of shares allocated being based on current market share value at time of issue. These shares are restricted for sale for three years.

Shares received as part Short Term Incentive (STI) scheme. These are received based on my performance for the year (as set percentage of my total STI payment) at a discount to the current market share value at time of issue These are restricted for sale for one year.

My first question is, one the shares have vested are available to, what price is allocated for tax purposes?

EOFY Shares: Is it the value at date of issue or is it the day they vest?
STI Shares: Is the value at date of issue, the day they vest or the discounted allocation amount?

I understand also that I get a CGT discount if I hold shares for a period of one year before selling them. Can you please confirm when the “clock” on that year begins? Is at time of issue (while still restricted) or is it at the time of shares becoming unrestricted / ordinary shares?

Thanks in advance for any assistance you can offer, apologies for the two questions in the one post.

[#2]

Not sure I have all the information to provide a suitable answer for you.

This will help you:

https://www.ato.gov.au/General/Employee-share-schemes/Employees/ESS-and-your-tax/ESS-and-capital-gai...

[#3]

Thanks very much Mcfanboy!

Between the information from the link you sent and some other information from another ATO community post, I think believe I've confirmed that

EOFY Shares: Are at the market valued at date of issue, not when they vest.

STI Shares: Are at the market valued at date of issue, not when they vest or the discounted issue.

I'm still unsure on whether the year towards receiving the 50% discount on CGT commences on issue or when the vest.  I'm guessing it is when they vest, but I'm hoping it is when they are issued.  Hopefully someone else can help?

[#4 · Accepted solution]

Hi @Milk,

Thanks for getting in touch!

Generally speaking, you acquire employee share scheme (ESS) shares for capital gains purposes on the day they are taxable under the ESS rules- at their market value on that day. This day is called the ‘taxing point’. This is also the day the 12 month rule starts for the 50% CGT discount.

Check with your employer if you are not sure of the exact day they were taxable under the employee share scheme rules or the market value on that day. In many cases, including salary sacrificed shares, the taxing point will be deferred from the date of granting/issue.

You can find more information about the treatment of ESS and CGT on our website.

Thanks.

[#5]

Hi @JodieH,

Thanks very much for your response.

After some digging around on my company intranet and ESS portal for the 'taxing point' I found the information I needed.  It was in fact the same day the shares vest, but I wouldn’t have know that for sure without your help.

Thanks!

Milk