Management Accounting: Tax Consequences for Purchasing Manager of Nourished Organic Skincare of Australia Pty Ltd (NOSA)

This document discusses the tax consequences faced by the purchasing manager of Nourished Organic Skincare of Australia Pty Ltd (NOSA) during the financial year 2018-19. It covers the provisions of Fringe Benefits Tax (FBT) Assessment Act, 1986 (FBTAA) and various situations related to it.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
Name of Student
Name of the University
Authors’ note

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Table of Contents
Answer to Question 2:................................................................................................................2
Situation 1.1:..........................................................................................................................2
Situation 2.2:..........................................................................................................................4
Situation 3.3:..........................................................................................................................5
Situation 4.4:..........................................................................................................................6
References:.................................................................................................................................7

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Answer to Question 2:
Betty is the purchasing manager with Nourished Organic Skincare of Australia Pty
Ltd (NOSA). The company is mainly engaged in buying organic skincare products from local
manufacturers and normally sell them to the public at NOSA stores all over Australia. The
purchasing manager Betty received his annual amounted to $90,000, excluding fringe
benefits. Here the purchasing manager of the company NOSA has faced some tax
consequences during the financial year 2018-19.
Fringe Benefits Tax is normally assessed under the Fringe Benefits Tax (FBT)
Assessment Act, 1986 (FBTAA). As per the provisions of this act every employer is required
to pay fringe benefits tax on their paid fringe benefits taxable amount for the particular year
of tax at the rate, which is set out in the FBTA (Barkoczy, 2019).
Situation 1.1:
Generally, according to the provision of Section 136(1) of FBTAA, fringe benefits are
one type of payment benefits, which is related to past expense. Expense payment benefits
normally arise where a person pays for or reimburses some of his expenditure that is incurred
by some other person as per section 20. Reimbursement of expenditure amount is usually
occurring where the recipient is compensated precisely for the total amount or a part of
expenses that already incurred (Barkoczy, 2019). However, such amount may not necessarily
have been disbursed as per Tax rule 92/15.
According to the problem, Betty, the general manager of NOSA, paid telephone bills
amounting to $600. However, as the telephone is partly used for a private purpose and partly
for the use of the business, the company NOSA reimbursed her $400 for using the phone for
business purpose. Here two tax consequences are arises; one is the provision relating to

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amount $600 and the second is the amount of $400, which is the reimbursement value (Barry
& Caron, 2015).
As per provision has given under Section 20A, an expenses payment benefits are
normally exempted if the purpose of no private use declaration covers it. Such an explanation
is needed to be approved by the employer. In general, the employer will only pay for or
reimburses the business-related expenses other than any private expenses (Butler &Calcott,
2018). According to the provision, the payments, which is incurred by Betty for business
purpose, is exempted from her income.
The provision of section 24 implies the value of deduction where an employee is
provided with the fringe benefits. The employee would have been entitling to a deduction for
the amount, which is relating to fringe benefits that he had incurred for the business purpose.
In case the amount is reimbursed by the employer than such amount will not be considered as
taxable. However, in case any extra amount is reimbursed other than actual expenditure then
such amount will be considered as additional income of the employee and chargeable as a
taxable income.
Here the amount of expenditure incurred by Betty as telephone charges for business,
which is reimbursed by the employer would not be considered as taxable charges and
normally such amount is exempted from tax liability as per the provision of section 20A.
However, the company need to pay some tax charges in case of payment, such as telephone
expenses.

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Figure 1: Tax Liability for NOSA and Betty.
Situation 2.2:
According to the provision of Section 136(1) of FBTAA, the residual fringe benefit
(RFB) is one type of benefits of tax, which is provided by the employer to its employees in
case improving their business quality (Fringe benefits tax, 2019). Under the provision of
section 47, in case any benefits which are used by the employee after acquiring for a private
purpose is normally considered as the exempted taxable income.
Here in the problem, the company in the case to keep up-to-date its employees are
provided some skincare products at a 30% discounting rate on its retail price. Betty, the
manager of the company, spent $1500 for such skincare products.
A period of residual fringe benefits is one type of residual fringe benefits, which is
generally provided over a particular period, normally exceeding one day as per the provision
under section 149. Normally the residual fringe benefits, which are provided over a day or
less, are generally considered as non-period residual fringe benefits. The taxable values of in-
house fringe benefits are calculated under the taxation rules contained in section 48-51. As
per the provisions under section 48(b) in case of evaluating the taxable value is usually
considered 75% of the nominal value of the fringe benefits that is normally reduced by the
recipient contributions (Maurer et al., 2017).

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Figure 2: Tax Liability under Residual Fringe Benefits.
Here, the amount of contribution made by Betty is considered as non-taxable charges
and the amount 75% of the notional value after deduction of recipients contribution is
generally considered as taxable charges.
Situation 3.3:
According to the tax provisions issued by Australian Tax law, any amount received by
an employee as salary, bonus, commission or other benefits is generally representing under
Incomer from personal exertions. As per such issued provisions, while an employee receives
any bonus amount, he needs to pay 47% of the receiving amount as taxable charges (Soled&
Thomas, 2016).
Here in the problem, the company was earned 50% extra profit comparing to past
years gain. The company was issued some amount as performance bonus valued at $4000 to
Betty, the manager of the company. Betty received such a bonus amount in the form of paid
holiday airfares to any Asian city.
In accordance with the provisions, Betty needs to pay an amount of 47% on the bonus
amount as taxable charges in the year 2019. Such bonus amount can be added with the
balance of salary, and it is generally Betty’s tax liabilities (Staff, 2017).

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Figure 3: Tax Liability relating to Bonus.
Situation 4.4:
Here in the problem, Betty’s employer required her to travel interstate regularly in the
case to negotiate with their suppliers. As a result, the manager accumulated a lot of points in
Qantas frequent flyer. She redeemed 60000 points for hotel accommodation in Singapore,
which was valued to $1800.
In accordance with the relevant tax provisions, here no such tax liabilities would be
arises for the company NOSA. The overall benefit is received by the manager of the
company, Betty, and it will be considered as her other income. So here, in this case, Betty is
liable to pay tax charges on such accommodation charges, like GST (Barkoczy, 2019).

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References:
Barkoczy, S. (2019). Foundations of Taxation Law (11th ed.). Oxford University Press.
Barry, J. M., & Caron, P. L. (2015). Tax regulation, transportation innovation, and the
sharing economy. U. Chi. L. Rev. Dialogue, 82, 69.
Butler, C., & Calcott, P. (2018). Optimal fringe benefit taxes: the implications of business
use. International Tax and Public Finance, 25(3), 654-672.
Fringebenefitstax(FBT).(2019).Retrieved16September2019,fromhttps://www.ato.gov.au/
General/Fringe-benefits-tax-(fbt)/
Maurer, L., Port, C., Roth, T., & Walker, J. (2017). A Brave New Post-BEPS World: New
Double Tax Treaty Between Germany and Australia Implements BEPS Measures.
Intertax, 45(4), 310-321.
Maurer, L., Port, C., Roth, T., & Walker, J. (2017). A Brave New Post-BEPS World: New
Double Tax Treaty Between Germany and Australia Implements BEPS Measures.
Intertax, 45(4), 310-321.
Soled, J. A., & Thomas, K. D. (2016). Revisiting the Taxation of Fringe Benefits. Wash. L.
Rev., 91, 761.
Staff, T. P. C. (2017). Distributional analysis of the conference agreement for the Tax Cuts
and Jobs Act. Washington, DC: Urban-Brookings Tax Policy Center, 2100.