Part of your pay handed over as company stock that "vests" over time. The catch most people miss: the tax falls due the day the shares vest — on that day's value — whether you sell them or not.
1The idea
Lots of companies pay part of a bonus in their own shares. You're promised them now, but you only actually own them on the vesting date — often in chunks over three or four years, to keep you around. That schedule is the "vesting".
Here's the part that surprises people: when shares vest, the tax office treats their market value on that day as income — exactly like a cash bonus that happened to be paid in stock. So vesting is a taxable event: the value is added to your income that year and taxed at your marginal rate.
You owe the tax on the vesting-day value even if you don't sell a single share — and even if the price falls afterwards.
2Who it's for
Anyone whose pay includes shares or share rights that vest — common in tech, banking, listed companies and senior roles (you might hear them called share rights, performance rights, or a "stock" bonus).
Not the same as buying shares in your employer with pre-tax pay — that's the scheme in the shares lesson, and the "up to $1,000 tax-free" there does not apply here.
Options and start-up schemes are taxed on different rules — take those to a registered agent.
3The worked example
500 shares vest, and on the vesting day they're worth $80 each. You earn $200,000, so your marginal rate is 47%.
Value at vesting (500 × $80)$40,000
Added to your income, taxed at 47%−$18,800
Yours after tax$21,200
Your employer reports the $40,000 but usually doesn't withhold the tax — so you need to find $18,800 you may not have. And if the price later slides to $50, you've already been taxed on $80. Hold without setting the tax aside and you can owe more than the shares are now worth.
4Try it on your numbers
The tax bill when shares vest
Value at vesting$40,000
Tax now, at your 47% rate−$18,800
Yours after tax$21,200
Set aside for tax this year$18,800
Don't pay it that year? The tax office adds interest — about $2,068 after one year (the general interest charge, ~11%/yr, compounding daily and no longer tax-deductible), and can add a penalty of 25%+ of the unpaid tax. It matches your employer's report, so it's found.
Tax is the value stacked on your salary at FY2025-26 rates + 2% Medicare. Interest rates change each quarter. Estimates only.
5The honest caveats
A later fall doesn't refund the tax. You're taxed on the vesting value; if the price drops after, that's a capital loss — usable only against capital gains, not your wage. So budget the tax on the vesting day.
Usually no tax is withheld. Unlike your salary, the bill is yours to fund — set the cash aside, or use "sell-to-cover" (selling some at vesting) if your plan offers it.
The 30-day rule. Sell within 30 days of vesting and you're taxed on the sale price instead of the vesting price — handy if the price moved.
Concentration risk. Your salary and a chunk of your wealth now ride on one company. Holding it all is a bet, not a default.
6How to action it
On each vesting date, note the market value — your employer's share-scheme statement (due ~14 July) has the figure, and it pre-fills your return.
Set aside your marginal rate of the vesting value for tax — or sell enough shares at vesting to cover it.
Declare it (don't leave it off — the tax office data-matches the statement). After vesting, the shares are a normal holding: hold 12+ months for the 50% capital-gains discount on any further gain.
A big vesting year can push you up a bracket or trigger other thresholds — worth taking to a registered agent.
General educational information, not personal tax or financial advice. Employee-share-scheme taxing points, the 30-day rule and interest charges have detail and change — confirm your specifics with a registered tax agent or at ato.gov.au. Figures are estimates for the 2025–26 financial year.