Computation of Fringe Benefit Tax and Capital Gain Tax

Contents
Answer 1:...............................................................................................................................................2
BRIEF INTRODUCTION...........................................................................................................................2
COMPUTATION AND METHOD..............................................................................................................2
Analysis..................................................................................................................................................3
CONCLUSION.........................................................................................................................................4
ANSWER 2:............................................................................................................................................4
Part 1:....................................................................................................................................................4
ANALYSIS:..........................................................................................................................................4
Part 2:................................................................................................................................................5
ANALYSIS.......................................................................................................................................5
Part 3:................................................................................................................................................5
ANALYSIS...........................................................................................................................................6
Part 4:................................................................................................................................................6
ANALYSIS...........................................................................................................................................7
Part A:....................................................................................................................................................7
Part B:....................................................................................................................................................7
Part C:....................................................................................................................................................7
References.............................................................................................................................................8

Answer 1:
BRIEF INTRODUCTION
Fringe benefit attract a high-quality staff towards the business and so it is very significant and a very
key part of business. If the fringe benefit is provided by the entity or firm to their employees, then all
the tax obligations related to it must be conversant with the company, like, Fringe Benefits Tax (FBT)
which is a type of tax payable by the employer of the entity for the benefits passed on the employee
of the firm. Computation of FBT is done on the basis of fringe benefits provided to the employee of
the entity and if the entity provides Fringe Benefits in Australia to their employees than one need to
register themselves for FBT. (business.gov.au, 2018)
COMPUTATION AND METHOD
Fringe benefit of the car can either be computed by using the statutory formula method or
operating cost method. The contribution of the employee would consist of the amount employee
directly paid to the employer for using the car and any other operating expenses incurred like
maintenance, fuel which the employee has paid. The GST amount would be very suitable for it to be
included. Regardless of the usage of the car and all the car fringe benefits provided to the employee
a flat rate of 20% would be relevant. (Commonwealth Of Australia, 2019)
In the given case, Lucinda an employee of Spices Pty was provided a car for her private use.
Throughout the 2018/19 FBT year, the cost of the car was $18,000, repairs $3,300 Insurance $2,200,
Fuel $ 990 (all above expenses are GST inclusive). Distance travelled 20,000 km (for the entire
2018/19 FBT year), Business use 70%, $1,000 was contributed by Lucinda towards the cost of the
car.
Based on statutory formula for the car the computation of the taxable value is:
= (car cost*statutory rate *No of private days use)/365- employees contribution
= (car cost*20%)- employee contribution if any
= (18000*20%)-1000
=2,600
In the calculation of car all the charges is to be included like delivery , GST, custom duty but
charges like registration charges ,stamp duty charges and any extended warranty cost involved
should not be included. (Commonwealth Of Australia, `2019)
The statutory rate of the car is generally prescribed on the basis of the distance travelled but with
effect from 10 May 2011 ,a flat rate of 20% is prescribed for over a period of 4 years. (Group of Eight
Australia, 2018)
One method of for the computation of FBT is the contribution by employee towards the car like fuel
and oil cost and are generally GST inclusive and should be deducted from the taxable value.
The other method of computation of FBT is by maintaining log book and establishing the percentage
use of car for business purposes. This method is called operating cost method. The log book is
generally maintained for over a period of 12 weeks and be relied upon for a period of over 12 years

unless the circumstances changes. In case of operating cost method, the various expenses which are
considered to be included as part of cost are petrol and repairs, Registration expenses, Insurance
expenses, depreciation expenses, Imputed interest-owned car expenses, Cost of lease car
The formula for the computation of FBT value of operating cost are here in below:
Taxable value= (Total vehicle cost*private use percentage)- employees contribution
Deemed depreciation and interest is also to be included in vehicle cost.
The computation is shown here in below and it is computed under section 10 of the Fringe Benefit
Tax Assessment Act.
$
Sly No Particulars Amount
1 Cost of Car 18,000.00
2 Repairs 3,300.00
3 Insurance 2,200.00
4 Fuel 9,90.00
5 Depreciation 4,500.00
6 Interest Rate 5.20%
7 Interest 9,36.00
8 Total 11,926.00
9 Payment made by Employee 10,00.00
10 Business Use 70%
11 Private Use 30%
12 Operating Cost 25,78.00
(Operating Cost * Private use- Payment made by employee)
By adding the cost of car, repairs, Insurance, fuel, depreciation of the car and total interest value,
the above value is calculated. To arrive at the operating cost the payment made by the employee is
deducted. The figure arrived at is multiplied with the percent use for business purpose.
Brief presentation of the above two methods:
Sly No Particular Cost
1 Statutory Method 2,600.00
2 Operating Cost Method 2,578.00
Analysis.
Assuming Spices Pty Ltd would like to minimise its FBT liability, and on the basis of above analysis for
the period 2018-19 it will be very much beneficial for Spiceco Pty Ltd if the computation of FBT
liability is by the entity following the operating cost method. The tax liability under both the method
are shown below:
Sl No Particular Gross Up Tax Value