Employee Share Schemes (ESS) opt in or out?

thoughts on ESS?

I’m with one of the major resource companies offering a ESS, but starting to wonder if it’s all worth it.

Shares get matched after 3 years. Initially seemed great, but not realising the taxing point is also deferred 3 years... Last tax return added almost $10k to my taxable income when I only put in $5k.

Any one convince me to stay in? I can’t see the benefits after last tax return was twice what I put in. Now thinking I’d be better using the money set a side and buy my own LIC’s.

 

Think you have to give more detail to analyse

 

Are you saying you put in $5k for ESS shares and then three years later they give you the same amount of shares and you have to pay tax on the extra shares?
I would happily pay tax on them if I am getting bonus shares.
It sounds like a great deal to me, I would be maxing it out!

If the tax payable is an issue for you and there is no holding period after the 3 years, you could always sell enough to pay the extra tax and keep the rest.

Buying LIC's at market value will not compare to what sounds like essentially a 50% discount.

 

Yeh that’s the idea. When the shares are vested (3 years down the road) the taxable amount is the current value of the shares. Which can be higher than original purchase price.

As it’s not really a stock I want to hold I’m questioning whether it’s all worthwhile.

 

Umm?
So you put in $5k
The company also put in $5k - which vests in 3 years.

In 3 years the shares are worth $20k, so the effective company input is $10k.
You get taxed on $10k (at 30%tax rate =$3k).

So you have $20k of shares which you effectively paid $8k for.

And your wondering if it’s all worthwhile?

What am I missing?

Blacky

 

I was speaking to the BIL who has a similar option available with RIO, if twas me, I'd take part in the opportunity, but that's just me

 

I've done it at 2 resource companies. It worked out quite positively for me each time but you probably want to be sure that you are going to stay the 3 years otherwise the deals are generally off.