Investing in shares is a common way Australians look to build wealth over time.
But whether you’re receiving shares through an employee scheme, buying them directly, or receiving them as a gift, it’s essential to understand the tax implications—especially if you want to avoid surprises come tax time.
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Buying Shares
When you purchase shares using your own funds, there is generally no immediate tax consequence. However, it is essential to keep detailed records of the purchase date, cost, and any associated fees. This information becomes important when you eventually sell the shares, as it helps determine your capital gain or loss.
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Employee Share Schemes (ESS)
If you receive shares or rights under an employee share scheme, the value of these may be considered part of your assessable income. In many cases, the tax is deferred until you either sell the shares or leave your employer. The timing and tax treatment can vary depending on the scheme’s structure, so it’s essential to review the specific rules or seek tailored advice.
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Gifting or Inheriting Shares
Receiving shares as a gift or through inheritance doesn’t generally create an immediate tax event for you, but there may be capital gains tax (CGT) implications for the person giving the shares. For inherited shares, the cost base typically resets to the market value as of the date of death. This means future capital gains will be calculated from this adjusted base when you eventually sell them.
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Bonus Shares and Rights Issues
Companies may issue bonus shares or offer rights to existing shareholders. While bonus shares are typically not taxed at the time of receipt, they can impact your cost base. Rights issues—where you have the opportunity to buy additional shares—are more complex and can involve tax consequences depending on whether you take up, sell, or let the rights lapse.
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Record Keeping and Reporting
Keeping good records is essential. You’ll need to track acquisition dates, purchase prices, brokerage fees, and any other relevant information. When it comes time to lodge your tax return, this data ensures you can accurately report dividends, capital gains, and any deductions available to you.
Navigating the tax treatment of shares can be complex, particularly if you’ve obtained them in different ways. As your accountant, we can help you understand your obligations, maintain compliant records, and identify opportunities to effectively manage your tax position.
If you’ve recently acquired shares—or are planning to—we’re here to provide tailored guidance. Why not start a conversation with us and see how we can help?
