Woodside Employee Shares that vested in August 2012 are taxable to most employees and Woodside has not paid any tax on your behalf meaning you are likely to have to pay additional tax when you do your tax return. Any tax minimisation strategy you employ needs to take be implemented by June 30, 2013.
We see the share plan as a bonus in the form of Woodside shares rather than cash. You need to decide what you should do with that bonus. Would you buy WPL shares?
That means you need to start planning NOW to maximise your returns. Don’t leave it too late!!
What you need to know
The value of the shares at the time they vest is likely to be treated in a similar way to salary or bonuses in that it will be taxed at your marginal tax rate. So for anyone with a taxable income over $80,000, you’ll be losing nearly 40%.
“You Will Have An Unfunded Liability.”
What we mean by this is that you are likely to receive a tax bill whether you have sold the shares or not. At best this means you have to fund the tax bill and may have to sell the shares to fund it. At worst, at the time you go to sell the shares to fund the tax liability, they have fallen heavily in value meaning you have paid tax at a higher value than you actually get when you sell them.
If you do sell, then you have to decide what you do with the proceeds. Naturally this is a great opportunity to handle that chunk of cash a smart way.
Your advice options:
Your accountant is well placed to outline the tax impact of these share plans. However if you only discuss this with them at the time you provide your information, which is generally after the end of the tax year, it is too late to reduce the tax payable. This is because as we mentioned earlier, any strategies need to be in place prior to June 30 in the year they vest.
- A stockbroker can help you decide whether you should hold the shares or sell and reinvest the proceeds into something different.
- Your spouse is likely to have pre-booked a nice holiday and you may have identified the next car upgrade!
- The common tax management strategy of making extra super contributions is now less useful for many who are already contributing the maximum to super due to Woodside’s generous 14% contribution rate and the current Governments mean fisted 25k limit. If you are fortunate enough to still have a defined benefit fund then it is important you contact us. We manage some powerful strategies for our other clients, which can make excess contributions very worthwhile.
Again, the most important thing is that any tax strategy you implement needs to have taken effect by 30th June 2013. This means planning must take place as soon as possible.
The BWG Way
We are making changes to strategies right now so that this big tax problem created by the vesting shares can be managed powerfully. Clearly there are also a number of other non-tax issues raised by this lumpy share entitlement, including whether to hold or sell, pay down debt or reinvest, retire or change jobs, etc.
We are outlining to our Woodside clients right now the options they have to ensure they use this bonus in the most powerful way to generate wealth for their family.
More info:
Get more information about employee share schemes from the ATO. If you’d like to work with us, start by reading about how we like to do business: The BWG Way. Then request a call for an obligation free chat.
Bennett Wealth Group is not an advice firm commissioned by Woodside so the comments in this post are not necessarily the views of Woodside or the various outsourced super, share plan or tax information channels. BWG is a Perth-based, advisor owned advice firm which just happens to have a high proportion of Woodside people as clients.