Strategy to leverage income tax on employee options exercise

Discussion in 'Investment Strategy' started by Jack Stolfiman, 3rd Apr, 2022.

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  1. Jack Stolfiman

    Jack Stolfiman New Member

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    I am seeking general advice on the next step of my strategy.

    At the moment, I am in a higher tax bracket (47%) than my wife (37%).

    We have structured our assets where negative assets are under my name and positive assets are under my wife's name

    a) Rental negative geared property in Melbourne in my name - targeting capital growth
    b) Rental positive geared property in Brisbane in my wife's name - targeting rental yield
    c) Slightly rental positive property in Sydney in our joint names (acquired initial as a PPoR, before we created our strategy) - currently resulting on Capital Growth
    d) PPoR in NSW on my name (as if it becomes an investment, it will be negative geared)
    e) Stocks and index funds (both targeting yield and capital growth) are on my wife's name.

    The company I work for, granted me employee options under an old employment share scheme - which was inefficiently setup and will trigger an income event when I exercise them (this has been amended in future grants).

    The exercise price is 60k and the fair value of the share as of now, is 300k - this will trigger an income tax of approximately 112k in the subsequent tax return of my exercise date.

    The already negative geared property I own will help offsetting this a bit, but it will not be significant.

    My initial reaction is to consider buying another negative geared property targeting capital growth to offset this large payout, but I would be interested in hearing if anyone has a similar portfolio to mine and has adopted a different strategy to being able to leverage this money more efficiently.

    Is the acquisition of another negative geared property the most suitable course of action to offset some of this large income tax I am about to pay after exercise? Does anyone have similar situation to mine and has adopted a different strategy to offset this large future income tax?

    Thanks in advance, any ideas are very welcome.

    Regards,
    Jack
     
  2. Terry_w

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

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    This sounds like you are only considering the short term tax aspects. What is negative will become positive and will have capital gains attached. Also consider the estate planning aspects as well not to mention land tax, financing, flexibility, asset protection etc.
     
  3. Thebiglebowski

    Thebiglebowski Well-Known Member

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    Are you able to prepay 12 months interest on your investment loan in June to reduce your tax liability?
     
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  4. Jingo

    Jingo Well-Known Member

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    If you have less than $500,000 in your super fund you may be able to make a contribution before June 30 to reduce the capital gains tax. Seek advice from your accountant before you proceed.
     
  5. Thebiglebowski

    Thebiglebowski Well-Known Member

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    Does the accountant needs to be licensed to recommend how much to contribute? I thought this may be the case.
     
  6. Terry_w

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

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    Yes, an AFSL or authorised rep