2 What are the risks to Michael if he decides to buy shares in his company? The ASIC MoneySmart website provides a case study of a share purchase plan (ASIC 2018):

Michael works for a large listed Australian company. Each year the company offers their permanent employees the opportunity to buy up to $1,000 worth of shares through a salary sacrifice arrangement. The shares are bought at the market rate but purchased with pre-tax income.

A condition of buying the shares this way is that employees cannot sell them for a period of 3 years from the date they buy the shares. If they leave the company within the 3-year period, they can sell the shares, but they may have to pay extra tax.

Michael thinks the company shares offer a good investment, and being able to buy them using his pre-tax income means he can buy more shares than he could if he bought them with his after-tax pay. He decides to go ahead and accept the offer for the full $1,000 in shares.