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Running Head: Fringe Benefits Tax

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Added on  2019-10-30

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In advising Shiny Homes Pty Limited and Charlie on the consequences of their transactions, this paper shall identify the specific fringe benefits, the taxation laws applicable to the fringe benefits offered and their consequences on the tax burden on both Charlie and Shiny Homes Pty Limited. The fringe benefits that are subjected to taxation under the Fringe Benefits Tax Assessment Act are related to those paid on cars, debt waiver, expense payment, housing, living-away-from-home allowance, airline transport, board, tax-exempt body

Running Head: Fringe Benefits Tax

   Added on 2019-10-30

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Running Head: Fringe Benefits TaxBusiness Law - Taxation Name of StudentName of Institution
Running Head: Fringe Benefits Tax_1
Fringe Benefits Tax 2IntroductionOxford dictionary describes tax to encompass the compulsory contribution orpayment by the citizenry in support of government services and operations. It is charged onthe people by the government on people's property transactions, income, and commodities.There is no direct benefit that a person derives from the payment of tax. Taxation law,therefore, refers to numerous laws which regulate people's liability to pay tax to thegovernment. Most organizations have designed a method of luring and retaining a workforceby providing fringe benefits to their workers; which can be classified as an incentive toattract and retain a workforce to ensure continuity of operations. In most organizations,fringe benefits are offered to all employees, but others only reserve fringe benefits to thoseidentifiable employees who offer notable or tremendous contributions to the day-dayoperations of the company (McConat, 2009, p. 32).In advising Shiny Homes Pty Limited and Charlie on the consequences of theirtransactions, this paper shall identify the specific fringe benefits, the taxation laws applicableto the fringe benefits offered and their consequences on the tax burden on both Charlie andShiny Homes Pty Limited.IssuesThe main issue to be determined in this scenario is whether Charlie obtained anyfringe benefits during the taxation period and if yes, whether the fringe benefits had anyconsequences on their relationship as employer and employee. It is employers who providefringe benefits to motivate them in the performance of their tasks. Where fringe benefits are
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Fringe Benefits Tax 3available, it has effects on both the employer and the employee. Since the employer in theprocess of offering fringe benefits affects the capital base of the company. Also, theemployees who receive the fringe benefits are exposed to the tax burden on particular fringebenefits except on those that the law exempts (CCH Australia, 2012, p. 25).Law and ApplicationFringe benefits are defined under Section 136 of the Fringe Benefits Tax AssessmentAct 1986 to include any benefit which has been provided during taxation year to anyemployee or any of their associates by the employers or their associates. Fringe Benefit tax,however, refers to that which has become payable by any employer of any value or all thefringe benefits during a tax period. The fringe benefits that are subjected to taxation under theFringe Benefits Tax Assessment Act are related to those paid on cars, debt waiver, expensepayment, housing, living-away-from-home allowance, airline transport, board, tax-exemptbody entertainment, car parking property, residual, loans, meal and entertainment benefits.The fringe benefits stated above are subjected to their own specific rules when it comes tolevying taxation (Wilmot, 2011, p. 60).Calculation of Fringe Benefits Taxable ValuesThe different types of fringe benefits have their unique and distinct method ofvaluation. For example, concessional treatment applies to in-house fringe benefits when theparties have not agreed on salary sacrifice. However, on unreimbursed recipientcontributions, they tend to reduce the value to be taxed on any fringe benefit. The deductiblerule is therefore applied in such instances where there is a subtraction of the reduction
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Fringe Benefits Tax 4amounts from the available taxable value of a particular fringe benefit. The deductible rule,however, is not applicable in certain fringe benefits including loans, airline transport,property and residual, expense payment board among others. The taxation period of a Fringe benefit is done from the 1st day of April to the 31st ofMarch of the subsequent year. The returns are required to be filed by the employer on a datenot later than the 21st of May of every year. At the close of the year, the employer who hadprovided the fringe benefit during the tax period is a requirement to promptly file tax returns.The total amount of the taxable amount that the employer is required to file is contained insection 135N of the Fringe Benefits Tax Assessment Act. The said total amount of thereportable fringe benefits of the employee for each year of income especially where theindividual fringe benefits availed to the employee for the period ending 31 March of the yearof income and in respect of the employee’s employment by the employer is more than $2,000. The formula for calculating fringe benefits tax is therefore as shown below:FBT = Fringe Benefit Taxable Amount X FBT RateIn calculating the fringe benefits taxable amount, the following steps are followed;First step: Calculating the taxable value of each Fringe Benefit that an employee has receivedSecond step: the Benefits are then divided into; GST, Creditable benefits and other benefitsThird step: Multiply
Running Head: Fringe Benefits Tax_4

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