The Money Mustache Community
Around the World => Australia Discussion => Topic started by: grantoz on May 22, 2021, 05:31:08 PM
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Hi All,
Long time forum and site lurker here, some way into my mustachian journey from somewhat inauspicious beginnings, but that's the subject of another post...
I'm an Australian citizen, resident in Sydney, for a long time I worked in the UK and I'm fortunate enough to hold a decent number of options in a company that's likely to IPO on the London Stock Exchange this year. Everything I read suggests that tax treatment for selling as part of a overseas IPO looks like effectively buying (at the option price) and selling (at the IPO price) in the same moment, so the whole profit amount will be subject to CGT, and this will push me well into the top marginal bracket, effectively 47% tax inc medicare levy.
The other option is for me to purchase the parcel of shares at the option price, and hold for a while. Most IPOs seem to be priced so that there will be a bit of a "pop" to the price in early trading, so it seems like there's a reasonable chance of a small short term profit for some of the shares. The rest I'd like to hold for a year before selling - because of the CGT discount I will be effectively insured against up to a 30% share price drop, and anything better than that will be much more profitable because of the 50% CGT discount. (I'm not thinking of holding long term at the moment)
I don't currently have a brokerage or trading account, but I'm looking to set one up with a provider that can provide me with access to the LSE for being able to sell when I choose to. From the options documentation I hold, it looks like if I choose to purchase these shares as opposed to disposing of them at the IPO, I will be acquiring the shares prior to IPO, and would then have to transfer them to a brokerage. I'm just starting to investigate what my options are for doing this sort of thing, but if anybody has any advice they could share as to what would be a good way to do this, I'd be very grateful for it!
Thanks and al the best,
Grant
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Best you get some proper tax advice. You're gonna get what you pay for here, and as you've detailed there's a number of implications.
If you acquired the options as part of an employee compensation arrangement there are going to be further tax implications.
I see a lot of these types of questions posted here, but very few are qualified to provide proper advice (a few seem to think a cursory ATO website search makes them an expert, when they've done absolutely no research into applicable case law). The honest idiot defence doesn't apply either.
Talk to your accountant before you do anything. Usually if you've already pulled the trigger and sold, it's too late to structure these things for the best tax outcome.
If you do generate significant taxable income from this the consequences could be more than just being hit with the top marginal rate (e.g. div 293 extra super tax).
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Thanks Marty. Totally agree on your point about tax advice.