Principles of Taxation Law Essay

2186 Words9 Pages
Principles of Taxation Law 2013 Answers to Questions CHAPTER 7 – FRINGE BENEFITS TAX Question 7.1 Determine whether the following benefits are fringe benefits or exempt fringe benefits and, where applicable, the relevant category of fringe benefit. Provide reasons for your answer: (a) Payment to employee for the estimated cost of the employee’s home phone bill as the employee sometimes has to use the home phone for work purposes. (b) Provision of accommodation at the family home to a child who is over 21 and works in the family business. (c) Payment of employee’s superannuation contribution by the employer to a complying superannuation fund. (d) Loan by Company X to one of its directors, Rupert, who is…show more content…
Advise Sorella and her employer of the tax consequences of this transaction. Answer There are two fringe benefits arising here. At the end of the FBT year, 31 March 2013, Sorella has received a loan fringe benefit and a debt waiver fringe benefit. The taxable value of the loan fringe benefit is: 4 Sep to 31 Mar: $5,000 x 7.4% x (209/365) = $211.86; and 4 Sep to 15 Jan: $5,000 x 7.4% x (134/365) = $135.84. See [7.170]-[7.190]. The taxable value of the debt waiver fringe benefit is the amount of the loan that is waived, ie $5,000: see [7.150]. Fringe benefits taxable amount = [($211.86 + $135.84) + $5,000] x 1.8692 = $9,995.92: see [7.400]. The loan fringe benefit and the debt waiver fringe benefit are both Type 2 fringe benefits as they do not include GST. See [7.400]. FBT payable = $9,995.92 x 46.5% = $4,648.10: see [7.420]. For Sorella, the loan and the debt waiver fringe benefits are non-assessable non-exempt income: see [7.440]. Question 7.4 Alan is an employee at ABC Pty Ltd (ABC). He has negotiated the following remuneration package with ABC: salary of $300,000; payment of Alan’s mobile phone bill ($220 per month, including GST). Alan is under a twoyear contract whereby he is required to pay a fixed sum each month for unlimited usage of his phone. Alan uses the phone for work-related purposes only; payment of Alan’s

More about Principles of Taxation Law Essay

Get Access