Principles of Taxation Law 2020
Answers to Questions
CHAPTER 7 – FRINGE BENEFITS TAX
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:
Jenny is an employee of the university. She is provided with 10 gift vouchers worth $50 each for use at the local supermarket as a Christmas gift. Advise Jenny and the university of the tax consequences of this transaction.
The provision of the vouchers is the provision of a fringe benefit. They would likely constitute a residual fringe benefit. Although each individual voucher is valued at less than $300 and may qualify for the minor benefit exemption, they must be looked at cumulatively as they are similar benefits and the total value is more than $300: see [7.320]. Therefore, the university is subject to FBT in relation to the provision of the vouchers: see [7.280]; [7.400]–[7.420]. The vouchers are non-assessable non-exempt income for Jenny: see [7.440].
Loo is an employee at a large real estate agency. He has negotiated the following benefits with his employer:
Advise Loo’s employer as to the FBT consequences (including calculation of any FBT liability) arising out of the above information. You may assume that any benefits are Type 1 fringe benefits.
Jasmine borrowed $15,000 from her employer on 1 February 2020 to pay for her wedding. The loan was provided at an interest rate of 2%. The wedding was on 29 February 2020 and on that day, Jasmine’s employer informed her that she only needed to repay $10,000 of the loan.
Advise Jasmine’s employer as to the FBT consequences (including calculation of any FBT liability) arising out of the above information. You may assume that the wedding costs are not a deductible expense for tax purposes. You may also assume that any benefits are Type 2 benefits.
There are two fringe benefits arising here. At the end of the FBT year, 31 March 2020, Jasmine has received a loan fringe benefit and a debt waiver fringe benefit.
The taxable value of the loan fringe benefit is:
1 Feb to 29 Feb: $15,000 x (5.37%-2.0%) x (29/366) = $40: and
1 Mar to 31 Mar: $10,000 x (5.37%-2.0%) x (31/366) = $29
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 = [($40 + $29) + $5,000] x 1.8868 = $9,564. The loan fringe benefit and the debt waiver fringe benefit are both Type 2 fringe benefits as they are “financial supplies” which are “input-taxed supplies” and therefore do not include GST. They are not creditable acquisitions from the employer’s perspective. See [7.410].
FBT payable = $9,564 x 47% = $4,495: see [7.420].
Rita’s employer sells furniture. On 17 January 2020, Rita purchased a table from her employer for $1,000. The table would usually be sold for $3,000 and cost the employer $500 to purchase. The employer decided to give Rita a tablecloth for the table as a “free gift” for the purchase of the table. The tablecloth would usually be sold for $150 and cost the employer $50 to purchase. Rita’s employer also decided to host a “leap year party” on 29 February 2020 for all employees and their partners. In total, there were 20 attendees (10 employees and 10 partners) and the party cost $3,300 (including GST). The party was held at a local Mexican restaurant.
Advise Rita’s employer as to the FBT consequences (including calculation of any FBT liability) arising out of the above information. You may assume that any benefits are Type 1 benefits. You may also assume that Rita’s employer has no other meal entertainment expenditure for the year, elects for Div9A to apply to the provision of meal entertainment fringe benefits and determines the taxable value of meal entertainment fringe benefits using the 50/50 split method.
Provision of table for $1,000
Provision of tablecloth for free
See [7.250]–[7.270] and [7.370].
“Leap year party”
We always make sure that writers follow all your instructions precisely. You can choose your academic level or professional level, and we will assign a writer who has a respective degree.
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document.
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension.A 100% refund is guaranteed.
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text.
Tutorpro support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Tutorpro Homework Help Services
At Tutorpro, we have top rated masters and PhD writers who will help you tacke that homework and score A+ grade. Tutorpro services covers all levels of education : high school, college, university undergraduate, masters and PhD academic level.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Tutorpro academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. This is free because we want you to be completely satisfied with the service offered.