A question regarding franked shares in the company I work for

Discussion in 'Shares & Funds' started by Dan Donoghue, 3rd Feb, 2021.

Join Australia's most dynamic and respected property investment community
  1. Dan Donoghue

    Dan Donoghue Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,631
    Location:
    Gold Coast, QLD
    Hi Guys, Hoping you can help as I don't really understand that much about shares.
    Each year I am given shares in the company I work for which are vested over 5 years, it's a retention scheme so once you have been there 5 years you are getting a nice little amount each year.

    The shares are fully franked and pay dividends twice a year.

    My question is, each year when the shares become availble to sell. Am I better to sell them and put the proceeds into my offset against my mortgage or am I better to leave them alone and let them build up?

    My analytics into shares is not really advanced enough to understand which would be the better option.

    Obviously I understand any information given on here is not financial advice and all decisions made are my own, I just feel like a few tips from you guys would help me make my decision here.

    Also on a side note, can someone explain to me why I get a tax bill every year from these shares? I thought the dividend tax was credited ie the franked part and I thought the increase in value would only be realised upon selling but my accountant said they make me have a bill every year.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    33,583
    Location:
    Australia wide
    That is impossible for anyone to answer except yourself really.
    - what are they worth
    - how many
    - what will the CGT on sale be
    - how much dividends do they pay
    - will they grow in value
    - likelihood of company collapse
    - are there potential buyers?


    One option might be to sell them to a different entity you control.
     
    Dan Donoghue likes this.
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    33,583
    Location:
    Australia wide
    They were rhetorical questions
     
    Dan Donoghue likes this.
  4. Dan Donoghue

    Dan Donoghue Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,631
    Location:
    Gold Coast, QLD
    Oh best I delete it then as some of that info is probs personal :)
     
    Terry_w likes this.
  5. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    8,374
    Location:
    It's All About Me.
    Too late. We got the screen shot. ;)
     
    Dan Donoghue likes this.
  6. Dan Donoghue

    Dan Donoghue Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,631
    Location:
    Gold Coast, QLD
    :D:D LOL
     
  7. RogTheBear

    RogTheBear Well-Known Member

    Joined:
    18th Jul, 2019
    Posts:
    317
    Location:
    Sydney, Orstralia
    I have such a scheme where I work. Unless it's a huge amount I'd tend towards benign neglect and you'll get a nice little bonus when you leave or retire. I get a $1000 a year. Nice freebie, but nothing to get excited about. 3 year vesting period.

    You get taxed because while the shares are a gift, the dividends they pay - even if automatically reinvested as the default for most of these arrangements will be - is income, so is taxed. So you add the dividends, then the franking, and it's adjusted same way it is for any other share, based on your marginal tax rate.

    Plus, once you get a few years worth and you have things vested and unvested and dividends from multiple years, the very thought of working out the actual capital gains liability with all those dates and amounts involved is the stuff of nightmares.

    I'm leaving mine as a retirement present to myself, at which stage I'll turn off the reinvestment thing and take the income.
     
    Dan Donoghue likes this.
  8. Stoffo

    Stoffo Well-Known Member

    Joined:
    14th Jul, 2016
    Posts:
    3,621
    Location:
    Sydney
    Or simply put
    The company likely pays a lesser tax rate (27%, franked amount) while you might be at 37%, so you get a tax bill for the (10%) difference
     
    Dan Donoghue likes this.

Are you an Aussie investor? Track all your trades, dividends, portfolio, CGT & more in one place with Sharesight. Ditch your spreadsheet & try the award-winning Australian portfolio tracker and tax reporting tool for FREE today.