How are RSUs taxed in Australia?

RSUs are almost always held under a tax-deferred employee share scheme. You are not taxed at grant. You are taxed at the deferred taxing point — generally when the RSUs vest and there is no longer a real risk of forfeiture or any disposal restriction. The market value of the shares at that moment is assessable income, taxed at your full marginal rate plus the 2% Medicare levy, with no 50% CGT discount. Your cost base then resets to that same market value and the 12-month CGT discount clock starts from the taxing point.

Does my employer withhold tax on employee share scheme income?

Generally no. Unlike salary, employers do not withhold PAYG tax on ESS discounts. The only exception is where you have not provided a TFN or ABN, in which case the employer must withhold at 47%. For everyone else the entire tax bill arrives as a lump sum when you lodge your return — often 12 to 18 months after the shares vested. This is why selling enough shares at vest to cover the tax, and quarantining that cash, is the standard defensive approach.

What is the $1,000 employee share scheme reduction?

Under Subdivision 83A-B, you can reduce the assessable discount on a taxed-upfront scheme by up to $1,000 per financial year. You qualify if your adjusted taxable income is $180,000 or less, the scheme was offered on essentially the same terms to at least 75% of Australian-resident permanent employees with three or more years of service, there is no real risk of forfeiture, you hold no more than 10% of the company, and the plan has a minimum three-year holding period. At a 32% marginal rate the reduction is worth $320 in tax; at 39% it is worth $390.

Am I still taxed on my shares if I leave my job in Australia?

No. Until 1 July 2022, cessation of employment was itself a deferred taxing point, meaning resigning could crystallise a tax bill on equity you had not yet received and might later forfeit. That taxing point was removed for ESS interests where the taxing point would otherwise have occurred on or after 1 July 2022. Older articles and some employer plan summaries still warn about this — check the date before relying on them.

What is the start-up concession for employee share schemes?

Subdivision 83A-33 removes income tax on the ESS discount entirely for employees of eligible early-stage companies — the whole gain is taxed as a capital gain instead, with access to the 50% discount. The company must be unlisted, incorporated for less than 10 years, an Australian resident, and have aggregated turnover of $50 million or less. Shares must be discounted by no more than 15%, or options must have an exercise price at least equal to the market value of a share at grant, and you must hold for three years. Crucially, for options the CGT acquisition date is the grant date, so the 12-month discount clock runs from grant rather than exercise.

What is the 30-day rule for employee share schemes?

If you dispose of an ESS interest, or a share acquired on exercising a right, within 30 days after what would otherwise be the deferred taxing point, the taxing point moves to the disposal date instead. This means the amount you are assessed on equals what you actually sold for, and there is no separate capital gain or loss to track. It is the mechanical reason a prompt sell-to-cover instruction after vesting produces a clean tax result.

Can I claim a capital loss against my ESS income if the share price falls?

No. The ESS discount is assessable income, not a capital gain, so a capital loss on the shares cannot offset it. If your shares are worth $42,000 at vest and you later sell for $28,000, you still pay income tax on the full $42,000 and the $14,000 capital loss is carried forward until you have a future capital gain to use it against. This asymmetry is the main financial risk of holding vested employer shares rather than selling.

How are US employer RSUs taxed for Australian residents?

The discount is Australian-sourced income if you performed the employment in Australia, regardless of where the company is listed, so it is taxable here. Convert the market value to AUD using the exchange rate at the deferred taxing point, which also fixes your AUD cost base — meaning later currency movements form part of your capital gain. Lodge a W-8BEN with the plan administrator to cut US dividend withholding from 30% to 15% under the tax treaty, and claim that as a foreign income tax offset. If your plan withholds US tax on vest as though you were a US employee, raise it with payroll immediately.

Employee Share Schemes in Australia: How RSUs, Options and Discounted Shares Are Actually Taxed (2026)

The single nastiest surprise in Australian personal tax is the one that arrives with good news attached. Your RSUs vested. The share price is up. And in October, your accountant tells you that you owe $16,000 in tax on shares you never sold, that no employer withheld a cent against, and which have since fallen 30%. Employee share schemes are one of the most valuable forms of remuneration in Australia — and one of the most badly understood. This guide covers how Division 83A actually taxes ESS interests, the difference between taxed-upfront and tax-deferred schemes, the $1,000 concession, the start-up concession, the 2022 rule change that quietly removed one of the biggest traps, what happens with US-listed employer shares, and the eight mistakes that cost Australian employees the most money.

This guide is general information only and does not constitute tax or financial advice. Employee share scheme rules are among the most technical in Australian tax law and the correct treatment depends entirely on the terms of your specific plan documents. Rates and thresholds shown are for the 2025–26 financial year. Speak to a registered tax agent about your own circumstances.

What Counts as an Employee Share Scheme

An employee share scheme (ESS) is any arrangement where you acquire shares or rights to shares in your employer — or a holding company of your employer — at a discount, because of your employment. The tax rules live in Division 83A of the Income Tax Assessment Act 1997, and they override the normal CGT rules for as long as the interest remains an ESS interest.

The three forms you are most likely to hold:

Restricted stock units (RSUs). A promise of shares delivered on a future vesting date, usually with no cost to you. Standard at listed multinationals and larger Australian tech employers. In Division 83A language, an unvested RSU is a right to acquire a beneficial interest in a share.
Options. A right to buy shares at a fixed exercise price. Common in start-ups and scale-ups. Worthless if the share price never exceeds the exercise price.
Discounted share plans. A broad-based offer to most staff to buy shares at, say, a 15% discount, or to salary sacrifice into shares. Common at banks, retailers, telcos and other large ASX employers.

What matters for tax is not the label your employer uses. It is whether the plan is taxed upfront or tax deferred, and if deferred, exactly when the deferred taxing point falls.

The Core Principle: The Discount Is Income, Not a Capital Gain

This is the sentence that catches everyone. The discount you receive on an ESS interest is assessable income — it goes in the ESS section of your tax return, is taxed at your full marginal rate, attracts the 2% Medicare levy, and gets no 50% CGT discount, no matter how long you held the rights before they vested.

The capital gains rules only start applying after the taxing point. At that moment, two things happen:

Your cost base resets to the market value of the shares at the taxing point (plus anything you actually paid).
Your 12-month CGT discount clock starts from the taxing point — not from when the rights were granted.

So an RSU granted in 2022 and vesting in 2026 gives you no CGT discount if you sell at vest. You need to hold the delivered shares for a further 12 months and a day.

The withholding trap. Employers generally do not withhold PAYG tax on ESS discounts. Unlike your salary, no tax is taken out at source. The one exception is if you have not given your employer a TFN or ABN, in which case they must withhold at 47%. For everyone else, the entire tax bill lands as a lump sum when you lodge — often 12 to 18 months after the shares vested.

Taxed-Upfront vs Tax-Deferred: Which Scheme Are You In?

Division 83A has a default and an exception. The default is that the discount is assessed in the year you acquire the ESS interest — a taxed-upfront scheme. If the plan meets the deferral conditions, assessment is pushed out to a later deferred taxing point.

Feature	Taxed upfront	Tax deferred
When taxed	Year of acquisition	Year of the deferred taxing point
Typical plan	Broad-based discounted share purchase plan	RSUs and options with vesting conditions
Amount assessed	Market value at acquisition less what you paid	Market value at the taxing point less what you paid
$1,000 reduction available	Yes, if the conditions are met	No
Real risk of forfeiture	Must be none	Generally required for deferral

For a scheme to be tax deferred, broadly: it must be an ESS to which Subdivision 83A-C applies, the plan rules must expressly state that deferred taxation applies, there must be a real risk you would forfeit the interest (or, for certain salary-sacrifice share plans, a genuine restriction on disposal), and you must not hold more than 10% of the shares or control more than 10% of the voting rights in the company.

The Deferred Taxing Point — and the 2022 Change That Fixed a Brutal Trap

For a tax-deferred scheme, the deferred taxing point is the earliest of the following.

For shares (including RSUs once shares are delivered):

When there is no longer a real risk of forfeiture and any genuine disposal restriction has lifted; or
15 years after you acquired the interest.

For rights and options:

When there is no longer a real risk of forfeiture and the scheme no longer genuinely restricts exercise; or
When you exercise the right and there is no real risk of forfeiting the resulting share and no genuine disposal restriction; or
15 years after you acquired the right.

Then the 30-day rule overrides everything: if you dispose of the ESS interest (or the share acquired on exercise) within 30 days after what would otherwise be the deferred taxing point, the taxing point moves to the disposal date instead. This rule is the mechanical reason a “sell to cover” instruction executed promptly after vest produces a clean result with essentially no capital gain or loss.

What changed in 2022. Until 1 July 2022, cessation of employment was itself a deferred taxing point. Leaving your job crystallised a tax bill on unvested or restricted equity you might never actually receive — and people did get taxed on interests they later forfeited. That taxing point was removed for ESS interests where the taxing point would otherwise have occurred on or after 1 July 2022. If you are reading older articles, forum posts, or even employer plan summaries that warn about being taxed when you resign, check the date. That trap is gone.

The $1,000 Reduction: Free Money on Broad-Based Plans

Under Subdivision 83A-B, you can reduce the assessable discount on a taxed-upfront scheme by up to $1,000 per financial year. To qualify, all of the following must hold:

Your adjusted taxable income is $180,000 or less. This is taxable income (including the ESS discount, before applying the reduction) plus reportable fringe benefits, reportable super contributions, and total net investment loss.
The scheme is broad-based — shares were offered on essentially the same terms to at least 75% of Australian-resident permanent employees with at least three years' service.
There is no real risk of forfeiture.
You do not hold more than 10% of the shares or control more than 10% of the votes.
The scheme has a minimum three-year holding period (or until you cease employment, if earlier).

A useful and under-used variant: where you salary sacrifice into shares, up to $5,000 of shares per year can be acquired under a taxed-upfront scheme and still access the $1,000 reduction, provided the plan meets the conditions.

Step	Amount
Market value of shares acquired	$5,000
Price you paid (15% discount)	$4,250
Assessable discount	$750
Less $1,000 reduction (capped at discount)	−$750
Amount added to taxable income	$0
CGT cost base of the shares	$5,000

Note the last line. Even though only $4,250 left your bank account, your cost base is the full $5,000 market value. The $750 discount was included in your income (then reduced to nil), so it is not taxed again on sale. Forgetting this and using $4,250 as the cost base overstates your capital gain by $750.

The reduction is capped at $1,000 of discount, not $1,000 of tax. At a 32% marginal rate (including Medicare levy) the maximum benefit is $320 per year; at 39% it is $390. Modest, but it is available every single year the plan runs, and it requires nothing of you except ticking the box on the offer.

Worked Example: 1,000 RSUs Vesting on a $150,000 Salary

Priya works for an ASX-listed employer and earns $150,000. On 15 March 2026, 1,000 RSUs vest with no remaining restrictions. The share price at vest is $42.00. She paid nothing for the RSUs. Her marginal rate is 39% including the Medicare levy.

Event	Amount
ESS discount assessed (1,000 × $42.00)	$42,000
Tax on the discount at 39%	$16,380
PAYG withheld by employer	$0
New CGT cost base	$42,000
CGT discount clock starts	15 March 2026

Priya lodges her 2025–26 return in October 2026 and receives a notice of assessment for roughly $16,380 payable in November. Two further consequences that catch people out:

HECS-HELP. The $42,000 is part of her repayment income. Her employer withheld HECS based on a $150,000 salary, so the shortfall on $192,000 of repayment income lands in the same assessment.
PAYG instalments. Because she now has substantial non-salary income, the ATO is likely to enter her into the PAYG instalment system for 2026–27 — meaning quarterly prepayments on income she may not receive again.

Now compare what happens next, depending on what she does with the shares.

Scenario	Sale proceeds	Capital result	Total tax
Sells all at vest ($42.00)	$42,000	Nil	$16,380
Holds 18 months, sells at $55.00	$55,000	$13,000 gain, 50% discounted	$18,915
Holds 18 months, sells at $28.00	$28,000	$14,000 capital loss	$16,380

Look hard at the third row. Priya received $28,000 of cash and paid $16,380 of tax — an effective rate of 58% on what she actually realised. The $14,000 capital loss cannot be offset against her salary. It sits as a carried-forward capital loss until she has a capital gain to use it against, which may be years away or never. This asymmetry is the core financial risk of holding vested shares.

Sell to Cover: The Default Everyone Should Consider

Because no PAYG is withheld, the standard defensive move is to sell enough shares at or near vest to fund the tax bill, then decide separately whether you want to own the rest. On Priya's vest, that means selling roughly 390 shares (39% of 1,000) to raise about $16,380, and setting that cash aside in a savings account or offset until the assessment arrives.

Sales inside 30 days of the taxing point are pulled back to the disposal date under the 30-day rule, so a prompt sale produces no separate capital gain to track. Some employer plans automate this; many Australian plans do not, and the instruction has to come from you.

The harder question is what to do with the remaining shares. The honest framing is this: after vesting, you hold a concentrated, single-stock position in the same company that pays your salary. If the company struggles, your income and your portfolio fall together. A common rule of thumb is to cap employer stock at 10% of your investable assets and sell the excess. Holding it because it “feels wrong to sell” is an endowment-effect decision, not an investment decision — the test is whether you would buy that many shares today with cash.

The Start-Up Concession: The Best Deal in Australian Equity Comp

Subdivision 83A-33 offers a genuinely generous concession for employees of early-stage companies. If it applies, there is no income tax at all on the discount. The entire gain is taxed under the CGT rules instead — and is eligible for the 50% discount.

The company must meet all of these tests:

Not listed on any approved stock exchange.
Incorporated for less than 10 years.
Aggregated turnover of $50 million or less in the prior year.
An Australian-resident company.

And the interests themselves must meet these:

For shares: the discount is no more than 15% of market value.
For options: the exercise price is at least the market value of an ordinary share at grant.
You hold the interest for at least three years (or until you cease employment).
You hold no more than 10% of the company.

The detail that makes this so valuable: for options under the start-up concession, your CGT acquisition date is the date you acquired the option, not the date you exercised it. The 12-month clock for the CGT discount runs from grant, so a long-held option exercised shortly before an exit still qualifies for the 50% discount.

Step	Start-up concession	Ordinary deferred scheme
50,000 options, exercise price $0.20	$10,000 paid	$10,000 paid
Share value at exercise, year 5	$3.00	$3.00
Income assessed at exercise	Nil	$140,000
Trade sale at $4.00, six months later	$200,000	$200,000
Capital gain	$190,000	$50,000
50% CGT discount applies?	Yes (clock ran from grant)	No (held 6 months)
Taxable amount	$95,000	$190,000
Tax at 47%	$44,650	$89,300

A $44,650 difference on the same economic outcome. And note the cash flow: under the ordinary deferred scheme, $140,000 of income is assessed at exercise in an unlisted company with no market to sell into. That is the scenario that has forced employees to decline exercising perfectly good options.

If you are joining a start-up, ask directly whether the plan is structured to qualify for the start-up concession, and get the answer in writing. It is a question about the plan documents, not about you, and any competent founder will already know.

Options That Never Pay Off: The Refund Rule

Under section 83A-310, if you acquired a right under a tax-deferred scheme, were assessed on a discount, and then lost the right without exercising it, the ESS interest is treated as if you never acquired it. You amend the relevant return and the tax is refunded.

The critical limitation: this does not apply where you simply chose not to exercise. If you hold vested, exercisable options, let them lapse because they are underwater, and that lapse was your decision, the refund rule does not rescue you. It is designed for genuine forfeiture — failing a performance hurdle, or a condition in the plan not being met — not for a decision you made.

This is one of the strongest reasons to be sceptical of options in an unlisted company where the taxing point falls at exercise. Confirm the plan's forfeiture mechanics before you rely on being made whole.

Working for a US or Foreign Employer

Australians holding RSUs in a US-listed parent are extremely common, and the mechanics add several layers.

The discount is Australian income. ESS discounts are sourced by reference to where you performed the employment. If you worked in Australia during the vesting period, it is Australian-sourced income and taxable here regardless of where the company is listed.
Convert at the taxing point. Use the exchange rate on the date of the deferred taxing point to work out the AUD discount and the AUD cost base. The ATO publishes daily and average rates.
Currency moves are part of your capital gain. Your cost base is fixed in AUD at the taxing point. If the AUD falls against the USD afterwards, you have an AUD capital gain even if the share price in USD is unchanged.
Dividends and W-8BEN. Lodge a W-8BEN with the plan administrator to reduce US dividend withholding from 30% to 15% under the Australia–US tax treaty. Claim the 15% as a foreign income tax offset on your Australian return.
US tax withheld on vest is usually wrong for you. Some global plans default to withholding as if you were a US employee. If you are an Australian tax resident and not a US person, that withholding generally should not apply to the vest — raise it with payroll early, because recovering it later means dealing with the IRS.
Foreign service periods. If part of your vesting period was worked overseas, the discount may be apportioned. This is genuinely complex — get advice rather than guessing.

What Your Employer Must Give You, and When

If you had an ESS taxing point during the year, your employer must give you an ESS statement by 14 July and report the same information to the ATO by 14 August. The statement shows the discount from taxed-upfront schemes (split between eligible and non-eligible for the reduction), the discount from tax-deferred schemes, and any TFN amounts withheld.

The figures usually pre-fill in myTax from late August. Do not treat the pre-fill as gospel — ESS reporting errors are common, particularly at multinationals whose payroll systems were built for US rules. Check the pre-filled amount against your own statement and your broker records before lodging.

Keep, for at least five years after you sell:

Every ESS statement.
Grant and vesting schedules showing the number of interests and their dates.
The market value used at each taxing point, and the exchange rate if foreign.
Broker confirmations for every sale, including sell-to-cover.

Portfolio trackers such as Sharesight handle ESS cost bases reasonably well, but only if you enter the taxing-point value as the acquisition price rather than the amount you paid.

Managing the Tax Bill Before It Arrives

A large ESS taxing point is one of the few genuinely predictable income spikes in Australian personal tax, which makes it one of the few worth planning around. Options, roughly in order of usefulness:

Sell to cover and quarantine the cash. The non-negotiable first step. Park it in an offset account if you have a mortgage — it earns your mortgage rate, tax free, and stays liquid.
Use concessional super contributions. A personal deductible contribution reduces taxable income at your marginal rate and is taxed at 15% inside the fund. On a year when the ESS discount pushes you into the 39% or 47% bracket, that spread is at its widest.
Check your carry-forward concessional cap. If your total super balance was under $500,000 on the previous 30 June, you can use unused concessional cap from the prior five years — potentially contributing far more than $30,000 in the spike year. Lodge the Notice of Intent with your fund before you lodge your return.
Realise capital losses deliberately. Only if you have capital gains — losses cannot offset the ESS discount itself, which is income, not a capital gain.
Watch Division 293. If income plus concessional contributions exceeds $250,000, an extra 15% applies to your concessional contributions. The ESS discount counts towards that threshold, so a big vest can drag an otherwise-unaffected year into Division 293 territory.
Check your Medicare levy surcharge position. The ESS discount is part of income for MLS purposes. A vest can push you over the $93,000 single threshold and trigger a surcharge for a year you did not expect it — worth knowing before 1 July, not after.

Eight Mistakes That Cost the Most

Assuming tax was withheld. It almost never is. Every dollar of the bill is yours to fund from cash you must set aside yourself.
Holding through the tax bill and the share price falling. You are taxed on the value at vest. A subsequent fall produces a capital loss that cannot touch your salary income.
Using the amount you paid as the cost base. Your cost base is the market value at the taxing point. Getting this wrong means paying tax twice on the same discount.
Expecting the 50% CGT discount at vest. The clock starts at the taxing point, not at grant — except under the start-up concession for options.
Declining a broad-based plan offer. The $1,000 reduction is a straightforward annual benefit that a large share of eligible employees simply never opt into.
Joining a start-up without checking the plan structure. The difference between a start-up-concession plan and an ordinary deferred plan can be tens of thousands of dollars on the same equity.
Letting employer stock become the portfolio. Concentration risk in the company that also pays your salary is the most correlated bet in personal finance.
Trusting the pre-fill. ESS reporting errors are frequent. Reconcile the ATO figure against your ESS statement every year.

Key Takeaways

The ESS discount is income, taxed at your marginal rate with the Medicare levy and no CGT discount. Only growth after the taxing point is a capital gain.
Employers generally withhold no PAYG on ESS discounts. Sell to cover, or set the cash aside yourself.
Your cost base resets to market value at the taxing point, and the 12-month CGT discount clock restarts from that date.
The 30-day rule means selling within 30 days of the taxing point moves the taxing point to the sale date — producing a clean result with no residual capital gain.
Cessation of employment is no longer a deferred taxing point for interests taxed on or after 1 July 2022. Ignore older guidance saying otherwise.
The $1,000 reduction on broad-based taxed-upfront plans is worth $320–$390 a year in tax for most eligible employees, every year.
The start-up concession removes income tax entirely and runs the CGT discount clock from option grant. Confirm before you accept the offer, not after.
Plan the spike year: carry-forward concessional super contributions, Division 293, the Medicare levy surcharge, HECS-HELP and PAYG instalments are all affected by a large vest.