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ACC708 Taxation Law

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ACC708 Taxation Law

 ACC708 Taxation Law

 

FBT Revision Questions

Question 1:

Aussie (P) Ltd. provided a facility of GYM to its employee Julie for free and cost of that Gym package is $ 1950 to the company. As Julie is receiving this benefit for free and no amount is paid by her asa contribution, it will be assumed as the Fringe benefits Tax (PBT) and will be taxable in the hands of the company (FBT Act, 1936). It is also considered that Aussie is entitled to get the input tax credit of GST so it will be grossed through the higher rate.

Particulars

Amounts $

Value of benefit

1950

Gross up

2.0647

Taxable value

4026

Tax rate

46.5

Tax obligation

1872

 

In this case, $ 1950 is a net value which requires gross-up with higher rates (2.0647 in 2013) and tax on such gross value will be paid by the company.

Question 2:

This case is related with an expense payment fringe benefit which refers that if an employer reimburses the expenditure of employee that was spent to his personal use, will be assumed as FBT and taxable in the hands of the employer. According to this regulation of the FBT Act 1936, the taxable value of a fringe benefit will be the amount which is reimbursed by the employer to its employee. In the presentcase,the taxable value will be 4200. Grossed up taxable value will be as below:

Particulars

Amounts $

Value of benefit

4200

Gross up factor

2.0802

Gross Taxable value

8737

Tax rate

47

Tax obligation

4106

 

Asthe company is eligible to take the deduction of GST, gross-up will be made with higher value to balance the tax payment. In the current case, the taxable value of benefit will be the actualamount which is paid by the employer to Julie.

Question 3:

Reimbursement of personal expenses like a phone bill, servant salaries etc. areassumed as FBT under fringe benefit act is paid by the employer to its employee. The existence of the employer-employeerelationship is necessary to identify the FBT. Gross-up of benefit is subjected to the GST provisions and anemployer, who is not entitled to get the GST credit, will gross up the benefit with a lower rate of gross-up.

Particulars

Amounts $

Value of benefit

6000

Gross-up factor in 2014

2.0647

Gross Taxable value

12388

 

The current case is related with personal expense reimbursement in which taxable value of benefit will be equal to the amount which is paid by the employer to an employee in reimbursement. As Aussie (P) Ltd is permitted to take the input credit, the gross-up will is made with a highergross-up factor which is 2.0647 for the year 2014.

Question 4

Particulars

Amounts $

Value of benefit

1200

Gross up factor

2.1463

Gross Taxable value

2576

Tax rate in %

49

FB Tax Payable at the end of 2016

1262

 

In this case, the amount of $ 1200 is Reimburse to the Julie by her employer Aussie (P) Ltd for the payment of electricity expenses. The company is also eligible to take the credit of GST so gross-up of taxable value is made through the higher Gross-Up factor. The applicable rate of FBT was 49% in 2016 and according to it, FBT payable will be $ 1262.

 

References:

1.      ATO (2018). FBT for small business. [online] Ato.gov.au. Available at: https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/Getting-started/FBT-for-small-business/?page=7 [Accessed 20 Sep. 2018].

2.      ATO (2018). FBT and entertainment for small business. [online] Ato.gov.au. Available at: https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/FBT-and-entertainment-for-small-business/?page=7 [Accessed 20 Sep. 2018].

3.      ATO (2018). Legal Database. [online] Ato.gov.au. Available at: https://www.ato.gov.au/law/view/document?DocID=SAV%2FFBTGEMP%2F00008 [Accessed 20 Sep. 2018].

4.      ATO (2018). Legal Database. [online] Ato.gov.au. Available at: https://www.ato.gov.au/law/view/document?DocID=SAV%2FFBTGEMP%2F00009 [Accessed 20 Sep. 2018].

5.      ATO (2018). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/document?DocID=SAV/FBTGEMP/00010&PiT=99991231235958/ [Accessed 20 Sep. 2018].

6.      ATOtaxrates (2018). Fringe Benefits Tax - AtoTaxRates.info. [online] Atotaxrates.info. Available at: https://atotaxrates.info/businesses/fringe-benefits-tax/ [Accessed 20 Sep. 2018].



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