Share schemes, RSUs and retention bonuses in NZ: what they are worth and how they are taxed

The three kinds

Shares and options. An employee share scheme gives you shares in your employer, or the right to them, connected to your employment. Inland Revenue's examples include long-term incentive plans, share option plans and performance share rights. An option is the right to buy shares later at a fixed exercise price, so it is only worth something while the share price is above it.

RSUs. Restricted stock units are a promise of shares, usually at no cost to you, delivered in parts as they vest. Inland Revenue names them as an employee share scheme too.

Retention bonuses. A retention bonus is cash, paid if you are still employed on a set date, on whatever conditions the letter or agreement sets.

A separate kind of scheme is not taxed: an exempt employee share scheme, open to almost all staff, with at most $7,500 of shares a year for each employee.

When they vest and what leaving costs

Vesting is the point when shares or cash become yours for good. A schedule might have a cliff, a period before anything vests, then a tranche every quarter or year until the grant is complete.

What happens if you leave before then is a contract question, answered by the plan rules, the grant letter or your employment agreement. Look for the leaver rules: what happens to unvested awards if you resign, are made redundant, retire or fall ill, and whether anything must be paid back. The Income Tax Act's own example has shares forfeited for nothing if the employee leaves within three years.

Retention bonuses work the same way. If the letter says you must still be employed on the payment date, resigning a week before means no bonus. If it says you must repay the bonus if you leave within a year, check exactly how. An employer can only deduct money from your pay if the law requires it, or if the deduction is reasonable and you have agreed in writing.

How Inland Revenue taxes shares and RSUs

A benefit under an employee share scheme is income under the Income Tax Act, in the same list as salary, wages and bonuses. It is worked out on the share scheme taxing date: broadly, the first day the shares are yours with no real risk of losing them, or the day they are cancelled or sold to someone unconnected, if that comes first. For RSUs that is normally when they vest. For options, it is usually when you exercise them.

The income is broadly the market value of the shares on that date, less anything you paid. If rights are cancelled, it is what you receive for them, less what you paid, so rights given up for nothing produce no income.

Your employer must report the benefit to Inland Revenue even if it takes no tax off, unless you have left and receive shares with no tax taken; then you declare it yourself. When the benefit comes as shares, it can choose to withhold PAYE at the extra pay rate, and can sell some shares to cover it if you agree. When it is paid in cash, it must withhold. ACC earners' levy and KiwiSaver do not apply.

If no tax is taken, you pay it after the tax year ends, and provisional tax may apply if the tax is more than $5,000. The benefit also counts as income for student loan repayments, child support and Working for Families. Since 1 April 2026, an unlisted company can choose, when it issues the shares, to defer the tax until the company lists or the shares are sold, transferred or cancelled (or, if they cannot be sold yet, until that restriction ends).

How a retention bonus is taxed

A retention bonus is employment income too. Inland Revenue lists annual and special bonuses among the lump sums, also called extra pay, that employers must deduct PAYE from. The rate comes from your last four weeks of pay, scaled up to a year, plus the bonus itself. Unlike share benefits, it carries ACC earners' levy, and KiwiSaver contributions come out of it if you are a member.

On $90,000 a year, paid fortnightly, four weeks of pay multiplied by 13 is $90,000. Add a $10,000 retention bonus and the total, $100,000, falls in the band taxed at 34.75% including ACC, so $3,475 of PAYE comes off before KiwiSaver. If $5,000 of RSUs vested instead and your employer withheld tax, the rate would be 33%, with no ACC: $1,650.

Putting a value on them

Value what has vested at today's price, because it is yours. Treat what is still vesting as a promise with conditions: it depends on you staying and on the share price. Count it after tax, because the benefit is taxed as income when it vests.

Take an illustrative grant of 4,000 RSUs, vesting a quarter each year over four years, at a share price of $5. Each year, $5,000 of shares vests. Leave after two and a half years and 2,000 have vested, worth $10,000. The other 2,000, worth another $10,000, lapse if the leaver rules say so.

Compare offers on what is likely, not the headline. Our article on valuing a bonus and commission in an offer covers variable pay, and salary versus the total package covers the rest of what a job is worth. If a new employer offers to replace forfeited awards, get the amount and dates in writing.

Keeping the dates on record

Keep the grant letter, the plan rules and each vesting confirmation, and note every date: the grant, the cliff, each tranche, and any date a retention bonus depends on.

In jobtracker.co.nz, Your Career has an Incentives section for the job you hold. Each grant keeps its date, the number, any exercise price, the share price you give it, and its vesting schedule. It shows what is yours now, what vests in the next 12 months and what you would give up by leaving now, and the next year's vesting is counted in the whole package on your Pay page, where a retention payment can sit too. The features page sets out what else Your Career keeps.

Keep your vesting dates in one place