All-Time High Shares = All-Time High Tax Bills. Are You Ready?

When one vesting event costs a family their home

Markets are soaring. NVIDIA’s share price has doubled in the last eighteen months. Tech stocks are hitting record highs. And if you’re a tech executive with shares about to vest, you might be sitting on what feels like a goldmine.

But here’s the question nobody’s asking: how is it possible to go backwards from receiving company stock?

It happens more often than you’d think. And right now, with markets at all-time highs, the risk is higher than it’s been in years.

The vesting trap nobody warns you about

Let’s say you work for NVIDIA. You were granted 1000 shares a few years back, and they’re vesting today. In that time, NVIDIA’s share price has climbed from around US$100 to over US$200 (roughly A$155 to A$310). The share price is currently at US$200 (approximately A$310). That’s roughly A$310,000 worth of stock landing in your account. Congratulations, right?

Here’s what most people miss.

The ATO treats that vesting event as an untaxed bonus. It doesn’t matter what the shares were worth when you were granted them. What matters is what they’re worth today, at vesting. That A$310,000 becomes taxable income. If you’re already earning over $200,000, you’re paying a 47% tax on it.

You now have a $145,700 tax bill.

And here’s where it gets dangerous. That tax bill isn’t due immediately. If your shares vest in July at the start of the financial year, you won’t pay that tax until April two years later. Most people forget it even happened. The shares sit in their stock plan account. The market keeps moving. Life goes on.

Until the tax bill arrives.

When the market turns against you

But markets don’t move in straight lines. Tech stocks are volatile. We’ve seen it before.

Take Zoom. During the pandemic tech bubble, shares reached a high of US$500. Today they’re sitting around US$60. That’s an 88% drop.

Now imagine this scenario. Your shares vest at US$200 (A$310). You decide to hold them because you believe in the company. The share price drops to US$100 (A$155). Your A$310,000 worth of stock is now worth A$155,000. But your tax bill? Still $145,700.

You’d have to sell almost every share just to cover the tax. You’re left with nearly nothing.

Now imagine the share price drops to US$50 (A$77). Your shares are worth A$77,000, but you still owe $145,700 in tax. You’re not just back at zero. You’re $68,700 in the red.

This isn’t theoretical. It happens. Executives have been forced to sell their family home to cover tax bills they couldn’t pay. The shares tanked. The tax bill didn’t.

Why right now matters

We’re not saying the market will crash tomorrow. Nobody knows that. But we are saying this: stocks are at historic highs. AI and tech companies have had extraordinary runs. Valuations are stretched. When everyone thinks it’s all going to a million, that’s when you need to think clearly.

If your shares are vesting now, at these elevated prices, your tax bill is also at an all-time high. And if the market corrects, even moderately, the numbers can turn against you fast.

That’s why having a plan isn’t optional. It’s essential.

Your four options at vesting

Once your shares vest, they’re yours to do with as you choose. However, the decision you make in those first few weeks will determine whether this becomes a source of wealth or a wealth trap. Here are the four main pathways we walk clients through.

Option one: hold everything. You keep all the shares in your personal name. No selling, no diversifying. If the share price keeps climbing, this works beautifully. But if the price drops, you’re exposed to the full downside. And you still need to find cash somewhere to pay your tax bill. This option works if you have other liquid assets or income to cover the tax. It’s risky if you don’t.

Option two: sell enough to cover tax, keep the rest. You sell roughly 50% at vesting to set aside for tax. The other 50% stays invested in the company. This provides upside potential while mitigating tax risk. The question then becomes, do you keep those remaining shares in your personal name, or do you transfer them into a family trust or self-managed super fund? That’s where real wealth structuring begins. See our previous article on structuring for executives for more on this.

Option three: Sell everything and diversify. You sell all the shares at vesting. You pay your tax bill, and you diversify the remaining funds across other investments. You remove concentration risk. You’re not tied to one company’s fortunes. We believe in diversification at Prime because holding too much in a single stock, regardless of the company’s quality, is risky. This option provides flexibility to invest through your family trust, super fund, or directly into other asset classes.

Option 4: leverage your equity. If you still have a mortgage, you could pay down debt with some of the proceeds, then redraw on your home equity to build a diversified investment portfolio (or reinvest back into the same stock, for that matter). This is debt recycling & it allows you to claim the interest on your home loan as a tax deduction to offset future vesting tax bills. It creates wealth-building capacity as you are effectively making your mortgage cheaper by claiming the interest as a deduction. It’s more complex but can be very tax-effective over time.

Each option has benefits and risks. The right choice depends on your specific situation, other assets, risk tolerance, and long-term goals. There’s no one-size-fits-all answer.

We help you see around corners

At Prime, we work with executives from Microsoft, Google, Zoom, Johnson & Johnson, Apple, and dozens of other companies. A large % of our clients hold company stock. It’s our wheelhouse. We have these conversations in our sleep.

We’re pathfinders. We help you see what’s coming before it arrives. That includes tax bills, market risk, and structuring opportunities most people miss.

We get you sorted. Then comfortable. Then thriving.

If your shares are vesting soon, or if you’re sitting on unvested stock and wondering what to do when the time comes, talk to us now. Not in two years when the tax bill lands. Now, when you still have options.

Markets are high. Tax bills are high. But your future doesn’t have to be defined by one bad decision at the wrong time.

Drop us a line. We make more possible with your money.
We specialise in helping tech executives and senior leaders navigate employee share schemes, tax strategy, and wealth structuring. Simply get in touch.