How to understand the after-tax value of executive share scheme holdings is a common challenge for the mining and resources executives I meet.
It’s a vitally important question that may arise from a diversity of individual circumstances. Some senior mining and resources professionals have moved country; others have ceased employment with the original employer; some struggle to keep track of the complexities of multiple awards, let alone manage them all; and others wish to understand changes in related legislation.
Case Study
I recently met with a mining executive to discuss their share scheme; in particular, they wanted to know the after-tax value of their holdings. Upon leaving Australia, they elected for their Australian shares be disregarded for Australian capital gains tax purposes (i.e. to defer the capital gain event until the Australian shares were sold or disposed of, or when the executive again became an Australian resident).
A second challenge arose from the fact that the executive had ceased employment with the original employer, so no longer had access to a valuable service offered by that employer, namely accounting advice on the international tax implications of the shares held.
A third issue was that the executive’s existing financial adviser was unable or unwilling to provide the advice they sought and wasn’t able to access or refer them to the professionals needed to provide the highly specialised tax advice required.
Our process
In this case, we helped the mining executive by reviewing their existing holdings and constructing the share issue timeline in order to create a spreadsheet that outlined the share schemes held. Drawing on our own expertise as well as that of P+Y Accountants and Business Advisors, we then prepared an after-tax summary of the share scheme. The spreadsheet allowed the executive to update moving share prices and any changes to exchange rates.
The outcome
Our services enabled the executive to not only clearly understand the after-tax value of their holdings, but to recalculate this when necessary by inputting changed variables such as share prices and exchange rates.
Our clients say…
“Brett at Stratus Financial Group first helped me understand the complex package of my executive share schemes. The strategies implemented around my share schemes help my wife and I sleep at night knowing that while there is some downside, our basic financial futures are secure while I can continue to add considerable value to my holdings. We now use superannuation to its maximum capacity which enables me to save a bit more for my future and we are saving for our future retirement home in a more effective way. I know we can get there as I can see now how we can accumulate more each year with the strategies Brett proposed. We have a future planned which gives us considerable peace of mind. Brett is a real detail person and I know I can rely on him to look after our financial requirements in conjunction with the team of specialists he works with.”
Bill, Mining Executive.
“Our previous adviser just did not address all of my issues. He seemed to be focused on the small bit of superannuation we had. There was no assistance with all of the other complex issues we faced. I was ready to receive advice in this area but the previous adviser just did not step up to the mark.”
Ian, Mining Executive, Brisbane.
Why seek advice?
Without appropriate advice about your executive share scheme, you may decide to sell your shares and use the proceeds without realising that this may incur a significant tax liability. We can advise you on other options. For example, you may be able to defer a tax liability for some time by using a protection strategy using derivatives. This may protect your desired value and allow you to use a tax-effective and low-interest loan to provide funding for alternative investments. This may also allow you to realise the tax liability during a period where you may have a lower tax rate. If you decide to maintain your exposure to the shares in an executive share scheme, it may be appropriate to consider whether or not a particular ownership structure (for example, superannuation, your partner or a family trust) may produce a more tax-effective and improved asset protection structure.
Highly specialised advice
Resources Unearthed is pleased to offer highly specialised advice on executive/employee share schemes. We have developed productive, professional relationships with multiple relevant key advisers, and this allows us to offer a single point of contact for our executive clients in the mining and resources sectors. In particular, we work with a panel of international tax experts that include Brenden Yantsch and David Pennell of P+Y Accountants and Business Advisors.
The team at Resources Unearthed can assist you with executive share schemes and other complex remuneration issues. To arrange a review of your current situation, please contact us today on 61 (0)7 3007 2007 or contact@resourcesunearthed.com.au
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Resources Unearthed is a solutions hub that provides integrated financial, legal and business advisory services for executives, professionals and business owners in the mining and resources sectors.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances.
