RSUs for Australian Expats: A Guide to Equity-Based Compensation

As part of relocating overseas, Australian Expats are often provided with more complex remuneration structures than a standard salary package. These packages frequently include equity-based compensation, which can form a significant component of overall wealth over time.

Understanding RSUs for Australian Expats is essential, as equity compensation introduces unique tax, cash-flow, and investment risks that differ significantly from ordinary employment income.

This article is Part 1 of a 3-part series designed to help Australian Expats understand equity-based compensation and how to manage it from a strategic financial planning perspective.

What Is Equity-Based Compensation for Australian Expats?

Equity-based compensation allows employees to receive an ownership interest in their employer company, typically in addition to their base salary and bonus. Common forms of equity-based compensation offered to Australian Expats include:

• Restricted Stock Units (RSUs)

• Stock Options / Employee Stock Option Plans (ESOPs)

• Employee Share Purchase Plans (ESPPs)

Each structure has distinct features and tax outcomes and is taxed differently depending on your country of residence and tax status. This article focuses specifically on RSUs for Australian Expats.

Why Do Companies Offer Equity-Based Compensation?

Employers offer equity-based compensation for several strategic reasons:

• Employee retention: Equity typically vests over time, encouraging employees to remain with the company.

• Alignment of interests: Employees benefit directly from company growth and share price appreciation.

• Cash-flow efficiency: Equity compensation can reduce the need for higher cash salaries, preserving working capital.

• Motivation and performance: Senior and key staff are incentivised to contribute to long-term company success.

For Australian Expats, this often results in a meaningful portion of total remuneration being tied to company shares.

What Are Restricted Stock Units (RSUs)?

Restricted Stock Units (RSUs) are one of the most common forms of equity compensation provided to Australian Expats.

RSUs represent a promise by the employer to deliver company shares to the employee at a future date, subject to specific conditions. Initially, RSUs are granted but remain restricted until they vest.

Once RSUs vest, the employee can:

• Sell the shares for cash

• Retain the shares and receive dividends

• Exercise voting rights (if applicable)

Understanding how RSUs for Australian Expats vest is critical to managing tax outcomes and investment risk.

RSU Vesting Schedules Explained

Vesting schedules determine when RSUs become available to the employee. Common vesting structures include:

• Graded Vesting: RSUs vest progressively over time. Example: 25% of the RSUs vest each year over four years.

• Cliff Vesting: 100% of the RSUs vest after a specified employment period (e.g. three years).

• Performance-Based Vesting: RSUs vest only if specific performance metrics or share price targets are achieved.

In most cases, if employment is terminated before RSUs vest, the unvested portion is forfeited.

How Are RSUs Taxed for Australian Expats?

The taxation of RSUs for Australian Expats is one of the most important planning considerations.

Tax at Vesting

RSUs are generally taxed as ordinary employment income at the time of vesting. The assessable amount is the market value of the shares on the vesting date.

Employer Tax Withholding

Many employers automatically withhold tax by selling or retaining a portion of the vested shares. In some cases, no withholding occurs, requiring the employee to fund the tax liability themselves. Australian Expats must ensure sufficient cash is available if withholding does not occur.

Capital Gains Tax (CGT) on Sale

If shares are sold after vesting, capital gains tax may apply on any increase in value.

The CGT calculation is based on the difference between:

• Market value at vesting, and

• Sale price

The applicable CGT rules depend on the country of tax residency at the time of sale.

Key Financial Planning Risks of RSUs for Australian Expats

One of the biggest risks associated with RSUs for Australian Expats is concentration risk.

Because RSUs are issued by a single company, employees can unintentionally accumulate a large proportion of their total wealth in one stock. This exposes them to:

• Company-specific risk

• Industry risk

• Market volatility

• Potential loss of capital if the company underperforms

In simple terms, it’s the classic “all your eggs in one basket” problem.

Managing RSU Concentration Risk Through Diversification

A structured financial plan can help Australian Expats manage RSU risk effectively. Common strategies include:

• Selling a portion of RSUs as they vest

• Reinvesting proceeds into a diversified investment portfolio

• Paying down debt

• Funding property purchases or other long-term goals

  
  

By selling RSUs progressively (for example, quarterly), employees can smooth out share price volatility and achieve a more consistent average sale price over time.

Financial Planning Opportunities for Australian Expats with RSUs

The optimal strategy for RSUs for Australian Expats often depends on the country of residence:

Low or no CGT countries (e.g. Singapore or Hong Kong):

• Selling shares shortly after vesting may be tax-efficient.

  
  

Higher CGT jurisdictions (e.g. Australia or the United States):

• Holding shares for more than 12 months may allow access to concessional long-term capital gains tax treatment (where applicable).

Timing decisions should always be assessed in conjunction with broader tax and investment planning.

Company Trading Windows and Insider Trading Rules

Australian Expats receiving RSUs are typically subject to company trading windows. These windows:

• Occur monthly or quarterly

• Often follow earnings announcements

• Restrict when employees can buy or sell shares

Understanding these restrictions is important to ensure compliance with insider trading policies and to plan liquidity events in advance.

Conclusion: Getting the Most Out of RSUs for Australian Expats

RSUs can be a powerful wealth-building tool for Australian Expats, but they also introduce complex tax, investment, and risk management challenges.

By proactively managing RSUs for Australian Expats through structured tax planning and diversification strategies, employees can reduce risk and align this form of compensation with their long-term financial goals.

Working with a Financial Adviser who specialises in Australian Expats can help ensure equity-based compensation is managed effectively across multiple tax jurisdictions.

Next in this 3-Part Series:

Part 2: Stock Options for Australian Expats (coming soon)

Part 3: Employee Share Purchase Plans (ESPPs) for Australian Expats (coming soon)

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the ‘Contact Us’ tab provided in the link below:

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General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.