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Tax on share pay-out after sale of a company

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Newbie

Views 427

Replies 3

If a small start-up company that one works for is sold to an overseas company and shares are paid out over a three year period, how will one be taxed on these numerous, staggered payouts?

 

The person in question has not received any monies from these shares previously. Shares were offered to each employee as an incentive to stay working at the company without receiving significant salary increases. Shares were only going to be paid out to employees, if the company was sold. Company has been sold, 6 years later.

 

The individual is fearful that the large first payout together with his salary will be taxed at a premium rate. How can the said individual reduce the amount of tax paid on the above mentioned situation. Any guidance would be greatly appreciated.

1 ACCEPTED SOLUTION

Accepted Solutions
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Best answer

Taxicorn

Replies 0

I don't believe that there would be any way to lessen the amount of tax due.

 

But remember that the person should be better off as sale price will exceed tax paid.

 

Also, were these issued under employee shares scheme?

 

They would need to have the documentation of when they received them so a cost base and gain/loss can be calculated.

 

Any gains would also be discounted by 50% because they would have been held for longer than 12 months.

 

You can minimise the amount of extra tax paid by making concessional contributions to your super and then claim a tax deduction for those.

This will have the effect of reducing your taxable income and therefore reduce the amount of tax paid.

 

 

 

3 REPLIES 3
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Taxicorn

Replies 2

Are they receiving the shares, have the ability to sell the shares or is the company selling them on behalf of them?

 

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Newbie

Replies 1

The only option is a staggered cash payout over 3 years. The company no longer exists as it has been bought over by a larger company. Thus there is no option to buy or sell the shares; just a payout as the company is now null and void.
Highlighted

Best answer

Taxicorn

Replies 0

I don't believe that there would be any way to lessen the amount of tax due.

 

But remember that the person should be better off as sale price will exceed tax paid.

 

Also, were these issued under employee shares scheme?

 

They would need to have the documentation of when they received them so a cost base and gain/loss can be calculated.

 

Any gains would also be discounted by 50% because they would have been held for longer than 12 months.

 

You can minimise the amount of extra tax paid by making concessional contributions to your super and then claim a tax deduction for those.

This will have the effect of reducing your taxable income and therefore reduce the amount of tax paid.