posted in: Building Wealth

Financial planning for bonuses, RSUs and employee share schemes

Almost every workplace has someone who’s the “expert” on RSUs or employee share schemes, and almost as often, what gets passed around as fact is only half right. These aren’t actually complicated issues once you work with them regularly, but for someone who deals with them once or twice a year, they can be genuinely confusing, and incorrect information travels fast around the office. It’s one of the more common things we untangle as a financial advisor in Sydney.

There’s always someone in their work who is an expert, in inverted commas, on this subject, and there’s always lots of opinions. To people who don’t work in this every day, these issues are quite complicated, and people can misunderstand or misinterpret how they actually work. More importantly, people have a habit of looking at things through their own prism and using their own lived experience as a metric but we all know how different each other are so you need to consider that. – Ethan Stein, Director and Financial Advisor at Montara Wealth

The reality is that a bonus, an RSU or an ESS allocation is just remuneration paid in a different form. It comes with its own set of rules around tax and timing, and treating it as complicated for its own sake usually causes people to lose sight of what actually matters: using the payment to build genuine financial independence.

How are cash bonuses actually taxed in Australia?

A cash bonus is generally taxed as ordinary income, at the same marginal rates as salary. 

Take someone earning a $200,000 salary who receives a $10,000 bonus. Because their income already sits above the $190,000 threshold, that bonus is taxed at the top marginal rate of 45%, plus the 2% Medicare levy, roughly 47% in total. That’s around $4,700 of tax on the bonus alone. 

Some employers also pay superannuation on top of a bonus, while others quote the bonus as a figure inclusive of super, which reduces what actually lands in the bank account, so it’s worth checking which applies before assuming the full number is take-home pay.

Why can bonuses feel like they’re taxed more heavily than normal salary?

This comes down to how a progressive tax system works, and a common misunderstanding about it. Earning more doesn’t mean your entire income is taxed at the top rate, only the portion that falls into each higher bracket is.

On a $200,000 salary, the effective tax rate, once you blend the tax-free threshold with each bracket, works out to roughly 30%, or around $60,000 of tax for the year. 

A $50,000 bonus on top of that salary, however, sits entirely above the $190,000 threshold, so the whole amount is taxed at the top marginal rate of around 47%, a tax bill of roughly $23,500. 

Seeing 30% tax on the base salary and close to 47% on the bonus is exactly what creates the sense that bonuses are taxed more harshly, even though the same progressive rates apply to every dollar earned.

How would you explain RSUs and Employee schemes in simple terms?

An employer offers RSUs or an ESS because they want staff aligned with the business’s growth and success, rather than simply paid in cash. In practice, that usually means shares are granted or offered at a discount to make participation attractive.

For tax purposes, RSUs and ESS shares are generally treated the same way as if the equivalent value had been paid in cash. 

Someone on a $200,000 salary who receives $50,000 of vested shares is taxed as though they’d received $50,000 in cash, generating a tax bill of roughly $23,500, even though what actually lands is $50,000 of stock rather than cash in the bank.

That difference is exactly what makes RSUs riskier than a cash bonus of the same value. The payment fluctuates in value after it’s received, and the timing of the associated tax bill doesn’t always line up neatly with when the shares are actually received or sold.

When does tax usually become payable on vested shares?

The tax liability is created at what’s known as the deferred taxing point, generally when there’s no real risk of forfeiting the shares and no genuine restriction on disposing of them. Unlike a bonus or a regular paycheque, an employer isn’t required to withhold tax on shares at that point.

Instead, the tax becomes payable when the relevant tax return is due. Shares received in July 2026, for example, would typically be reported on a tax return due October 2027, and a registered tax agent can often extend that further, sometimes out to around May 2028 the year after that. 

In practice, that can mean close to two years between receiving the shares and actually having to fund the tax bill, which makes planning ahead for that liability worthwhile rather than assuming it will sort itself out later.

Can someone owe tax even if they haven’t sold the shares yet?

Yes. The value of the shares at the deferred taxing point is treated as assessable income regardless of what happens to the share price afterward. If $50,000 of shares are received and the price later falls to $10,000, the original $50,000 is still taxable income; the fact that the shares have since lost value doesn’t reduce that tax liability.

What does change is the capital gains position from that point forward. Selling the now $10,000 parcel would trigger a $40,000 capital loss, but that loss can only be offset against capital gains, not against ordinary income. 

If another share parcel had grown from $50,000 to $90,000 in the same period, the $40,000 gain and $40,000 loss would net out to zero for capital gains purposes, even though the original $50,000 of RSU income was still taxed in full when it vested.

Selling vested shares vs continuing to hold them 

The right answer depends on the broader strategy, not just the shares themselves. 

Holding everything in one company creates a diversification problem, and concentrated equity behaves differently across the growth vs defensive investments divide than most people assume.

If that company performs well, concentrated exposure works in your favour, and if it doesn’t, the downside is amplified. Neither outcome is automatically wrong, but it’s a risk that needs to be made consciously rather than by default. 

The tax consequences of selling, and where the proceeds are actually going, both need to be part of that decision.

How important is concentration risk when your salary comes from the same company as your shares?

This is one of the more overlooked risks in financial planning for executives and senior professionals. A lot of people have their groceries, their mortgage and a large share of their investment portfolio all reliant on the same employer, which is a significant concentration of risk in one place.

There are a lot of people whose groceries and mortgage are reliant on a business they work for, and a lot of their investment portfolio is also reliant on that business. That’s a huge concentration risk. It’s about whether the juice is worth the squeeze, and you need a broader context to make that decision. – Ethan Stein, Director and Financial Advisor at Montara Wealth

Two scenarios show how differently this can play out. 

Scenario 1: a strong position outside the shares

Someone with their home paid off, $5 million in super and another $5 million across investment properties and shares, living on $200,000 a year of expenses, is clearly financially comfortable. 

If a large chunk of RSUs from a startup employer sit on top of that position, and the business struggles, the loss of both the shares and the role wouldn’t leave them destitute. 

In that case, holding the concentrated position may genuinely be worth the risk, particularly where building a larger legacy or funding a future goal like a charitable foundation is part of the plan.

Scenario 2: the shares are most of the position

Someone carrying a significant mortgage, with limited personal assets outside super, around $100,000 in savings, working a specific, hard-to-replace role at the same company whose shares make up most of their portfolio. 

For that person, the same concentration risk is a much harder one to justify. The starting position, not just the shares themselves, is what determines whether the risk is worth taking.

Should a bonus or high-income-year cash flow go into super?

It can be one of the more effective moves available, particularly through carry-forward concessional contributions, which let unused cap space from the past five years be used in a high-income year when the deduction is worth the most. 

Our article on the [2026-27 super contribution caps] covers this in more detail, including who tends to benefit most and when it isn’t the right call. If contributions are coming out of regular pay rather than a lump sum, salary sacrifice is usually the cleaner mechanism.

The short version: a bonus or vesting event is an opportunity, not just a tax event, but where that opportunity should be directed, into super, into paying down debt, into liquid investments, or simply enjoyed, depends entirely on the broader plan.

What happens if a bonus or vesting event pushes you over the Division 293 Threshold?

Not much can be done about Division 293 itself once income for the year crosses $250,000. It’s a rigid tax, and concessional contributions above that threshold are effectively taxed at 30% instead of 15%. 

Where there’s spare cash flow, directing some contributions to a lower-earning spouse’s super can help bring the household’s overall effective tax rate down, but that addresses the family position rather than removing the Division 293 liability itself.

Don’t get too focused on the tax side. The main aim of the game is getting invested and giving yourself financial independence. Death and taxes are the two guaranteed things in life. We don’t hesitate to pay the 10% GST when we buy a car, or when we go out to a nice restaurant. Don’t let Div 293 cloud your judgment. – Ethan Stein, Director and Financial Advisor at Montara Wealth

What other priorities should be considered before putting money into super?

Super locks money away, generally until preservation age, so before directing a bonus or vested share proceeds there, it’s worth making sure there’s sufficient personal wealth and cash flow to cover nearer-term goals, a mortgage, school fees, an upcoming investment, or simply a buffer for the unexpected. There’s no fixed rule here; it comes down to how comfortable the current cash position already is relative to what’s coming up in the next few years.

What records should be kept once shares vest?

Keep every record from grant through to vesting and eventual sale, and work with an accountant who maintains them properly. 

This matters more than it might seem: equity portfolios held for decades are increasingly common, and when records are incomplete, working out the correct cost base and tax position when the shares are eventually sold, or when they form part of an estate, can become a genuinely difficult and costly problem. 

Digital record-keeping has made this easier than it once was, but the responsibility for keeping records intact still sits with the individual.

Are there client examples that illustrate these decisions? 

Every bonus and vesting scenario looks different depending on age, industry, existing wealth and what someone is actually trying to achieve, which makes a single generic case study more misleading than helpful here. Clients receiving bonuses at 25 and at 65 are working with completely different considerations, even if the mechanics of the tax are identical.

Rather than a hypothetical example, this is a case where a proper conversation with a financial advisor in Sydney about your specific numbers, your existing exposure to your employer, and your broader goals will tell you far more than a generalised scenario ever could.

A practical way to think about a Bonus, RSU or ESS payment

Before deciding what to do once a bonus lands or shares vest, it’s worth working through:

• What tax has already been withheld, and what additional tax liability is likely to land when the return is due?
• If shares have vested, is the deferred taxing point already behind you, and is there a plan to fund that tax bill even if the share price falls afterward?
• How much of your total wealth, and your income, is tied to this one employer, and is that level of concentration a deliberate choice or simply how things have accumulated?
• Would directing some of this year’s cash flow into super, potentially through carry-forward contributions, make sense given your income this year?
• Is there a nearer-term priority, a mortgage, school fees, a cash buffer, that should come first?
• Are your records for every grant, vesting event and disposal complete and held somewhere durable?

There’s no universal answer, and the mechanics of tax are only ever the starting point. The real work is deciding what a bonus or a share allocation is actually for, in the context of everything else going on financially.

Book a quick Wealth Planning Consultation and we’ll help you see where you stand, what’s possible, and how to make it happen.

• Understand the tax timeline on your specific bonus or vesting event before it catches you out
• Work out how concentrated your wealth really is, and whether that’s a risk worth carrying
• Get a clear plan for what to do with the proceeds, instead of defaulting to “hold everything” or “sell everything”

Get started here.

Financial Disclaimer: The information provided in this article is for general knowledge and informational purposes only and does not constitute financial advice. Individual circumstances vary significantly. It is essential to consult with a qualified and licensed financial planner and registered tax agent before making decisions about bonuses, RSUs or employee share schemes. Past performance of any asset class is not indicative of future results. Tax rates, thresholds and ESS rules referenced in this article reflect the 2026-27 financial year and are subject to change.