Business Tax & GST III Assignment
Question 1
All sections references in this question are to the Fringe Benefit Assessment Act 1986 unless stated otherwise.
A car fringe benefit arises where a car is made available to an employee for private use and the vehicle is owned or leased by the employer (s7(1)(b)). Based on the information from the question, two methods of calculation for car fringe benefits can be used: “statutory formula” (s9 (1)) and “operating cost method” (s10(2)). Once we got the results, the one which gave a lower FBT liability can be chosen to apply.
(i) The statutory formula in s9 (1):
ABC/D- E
A = Base value of the car = expenditure incurred in acquiring the car excludes stamp duty (included GST) (s136 (1)) = $52,000 + $495 = $52,495
B = Statutory fraction is 20% for all taxpayers for the FBT year ending 31 March 2016 for new contracts entered into from 1 April 2014 (as per s9 (2)).
C = Number of days during the year in which the car was privately used = 274 days
D = Number of days in the FBT year of tax = 366 days (2016 is a leap year)
E = Recipient’s payment = $3,000
Therefore, the taxable value of the car fringe benefit is calculated to be:
ABC/D- E = (52495 ×0.20 ×274)/366- 3000 = $4859.907104
This amount is then grossed up by the Type 1 factor of 2.1463 (as this employer would be eligible to claim input tax credits for this expenditure) (s5B (1B)):
= $4859.907104 × 2.1463
= $10430.81862
The FBT liability would then be: (with the FBT tax rate for
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