Montgomery’s Pty Ltd’s Taxable Values of the Benefits and its Fringe Benefits Tax Liability
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This article discusses the taxable values of the benefits provided by Montgomery’s Pty Ltd and its fringe benefits tax liability. It covers various types of fringe benefits and their calculations.
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Surname 1
Name:
Instructor’s Name:
Course Details:
Date of Submission:
Montgomery’s Pty Ltd’s Taxable Values of the Benefits the Firm Provided and its Fringe
Benefits Tax Liability
a) Fringe Benefit on Providing Brad Cruise with a Cash salary of $125,000
Cash salary is not part of the fringe benefits. According to Caplow, fringe benefits are the
things that the employer gives to his or her employees or the employee's associates, or the family
members as a benefit as an alternative to remunerating that individual with salary.
b) Fringe Benefit on Superannuation Payable of 12% Based on the Cash Salary
Employers should pay 9.5% of every eligible worker's salary as superannuation
contributions to a conforming superannuation fund (Hodgson and Prafula). Therefore, the benefit
that Brad gets from his employer is as follows.
Cash salary = $125,000
The actual rate that employer provided = 12%
Government’s set rate = 9.5%
The benefit that Brad gets = 12%- 9.5% = 2.5%
Taxable value = 2.5% X $125,000 = $3,125
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The
9.5% requirement of salary superannuation contributions falls under section 19(4) of the
Superannuation Guarantee Administration Act 1992 (SGAA).
Name:
Instructor’s Name:
Course Details:
Date of Submission:
Montgomery’s Pty Ltd’s Taxable Values of the Benefits the Firm Provided and its Fringe
Benefits Tax Liability
a) Fringe Benefit on Providing Brad Cruise with a Cash salary of $125,000
Cash salary is not part of the fringe benefits. According to Caplow, fringe benefits are the
things that the employer gives to his or her employees or the employee's associates, or the family
members as a benefit as an alternative to remunerating that individual with salary.
b) Fringe Benefit on Superannuation Payable of 12% Based on the Cash Salary
Employers should pay 9.5% of every eligible worker's salary as superannuation
contributions to a conforming superannuation fund (Hodgson and Prafula). Therefore, the benefit
that Brad gets from his employer is as follows.
Cash salary = $125,000
The actual rate that employer provided = 12%
Government’s set rate = 9.5%
The benefit that Brad gets = 12%- 9.5% = 2.5%
Taxable value = 2.5% X $125,000 = $3,125
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The
9.5% requirement of salary superannuation contributions falls under section 19(4) of the
Superannuation Guarantee Administration Act 1992 (SGAA).
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Surname 2
c) Fringe Benefit on Providing Brad Cruise with a New Audi sedan (Including GST)
According to Braverman, Stephen, and Kerrie, the vehicle’s taxable value is calculated in
the following way.
Taxable value = A x B x C
Where A = the vehicle’s cost to the employer
B = the legal percentage
C = the percentage of distance that the worker used the car for private reasons
Hence, from the question,
A = $1,250 per month X 12 months = $15,000
B = 47% starting from 1 April 2017 to 31 March 2018 (Australian Taxation Office).
C = 100% - 70% (business-related kilometers) = 30%
Taxable value = $15,000 X 47% X 30% = $2,115
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The car
fringe benefit rates on the cars an employer leases are found in section 7.7 of the FBTAA 1986
(Prince).
d) Fringe Benefit on Providing Brad Cruise with an Entertainment Allowance of
$3,000
The employer pays FBT on the share that relates to his or her worker’s entertainment
only or the worker’s associates (Raftery). In this case, the taxable value = $3,000 and not the
$3,100 that Brad Cruise spent entertaining clients. This is a type 1 benefit, since, Montgomery’s
Pty Ltd is eligible for a GST credit. The expense entertainment allowance fringe benefits on the
special legislative provisions are found in section 19.5 of the FBTAA 1986 (Raftery).
c) Fringe Benefit on Providing Brad Cruise with a New Audi sedan (Including GST)
According to Braverman, Stephen, and Kerrie, the vehicle’s taxable value is calculated in
the following way.
Taxable value = A x B x C
Where A = the vehicle’s cost to the employer
B = the legal percentage
C = the percentage of distance that the worker used the car for private reasons
Hence, from the question,
A = $1,250 per month X 12 months = $15,000
B = 47% starting from 1 April 2017 to 31 March 2018 (Australian Taxation Office).
C = 100% - 70% (business-related kilometers) = 30%
Taxable value = $15,000 X 47% X 30% = $2,115
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The car
fringe benefit rates on the cars an employer leases are found in section 7.7 of the FBTAA 1986
(Prince).
d) Fringe Benefit on Providing Brad Cruise with an Entertainment Allowance of
$3,000
The employer pays FBT on the share that relates to his or her worker’s entertainment
only or the worker’s associates (Raftery). In this case, the taxable value = $3,000 and not the
$3,100 that Brad Cruise spent entertaining clients. This is a type 1 benefit, since, Montgomery’s
Pty Ltd is eligible for a GST credit. The expense entertainment allowance fringe benefits on the
special legislative provisions are found in section 19.5 of the FBTAA 1986 (Raftery).
Surname 3
e) Fringe Benefit on the Reimbursement of Brad Cruise’s Home Internet and Mobile
Telephone Expenses of $960 ($350 for Private Calls)
The employer pays FBT on the share that relates to his or her worker’s private use of the
home internet and mobile telephone expenses (Raftery). In this case, the fringe benefit value is
$350. This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The
telephone expenses fringe benefits found in section 19.4 of the FBTAA 1986.
f) Fringe Benefit on Providing Brad’s Wife with a Low-Interest Loan (including GST)
According to Caplow, the employer gives loan fringe benefits to his or her employees or
the employee's associates. Starting from 1 April 2017 to 31 March 2018, the loan’s interest rate
is 5.25% as per the Australian government (Australian Taxation Office). The low rate of interest
fringe benefits is calculated in the following way.
The loan that Montgomery’s Pty Ltd gave Brad’s wife = $75,000
Interest rate on the loan = 4%
The government’s set rate = 5.25%
The benefit that Brad’s wife gets = 5.25% - 4%= 1.25%
Taxable value = 1.25% X $75,000 = $937.50
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The
low-interest loan fringe benefits are found in section 16 of the FBTAA 1986 division 4 division
A (Hodgson and Prafula).
e) Fringe Benefit on the Reimbursement of Brad Cruise’s Home Internet and Mobile
Telephone Expenses of $960 ($350 for Private Calls)
The employer pays FBT on the share that relates to his or her worker’s private use of the
home internet and mobile telephone expenses (Raftery). In this case, the fringe benefit value is
$350. This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The
telephone expenses fringe benefits found in section 19.4 of the FBTAA 1986.
f) Fringe Benefit on Providing Brad’s Wife with a Low-Interest Loan (including GST)
According to Caplow, the employer gives loan fringe benefits to his or her employees or
the employee's associates. Starting from 1 April 2017 to 31 March 2018, the loan’s interest rate
is 5.25% as per the Australian government (Australian Taxation Office). The low rate of interest
fringe benefits is calculated in the following way.
The loan that Montgomery’s Pty Ltd gave Brad’s wife = $75,000
Interest rate on the loan = 4%
The government’s set rate = 5.25%
The benefit that Brad’s wife gets = 5.25% - 4%= 1.25%
Taxable value = 1.25% X $75,000 = $937.50
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The
low-interest loan fringe benefits are found in section 16 of the FBTAA 1986 division 4 division
A (Hodgson and Prafula).
Surname 4
g) Fringe Benefit on Brad’s Purchase of a New Desktop Non-Portable Computer
Montgomery’s Pty Ltd selling price to the public = $3,000. Brad purchase price = $2,500.
According to Cortis and Christine, the computer falls under the retail goods (identical) because
the firm sells computers, hence, the computer’s fringe benefit = (75% X $3,000) - $2,500 =
$2,250 - $2,500 = $-250. The retail goods (identical) fringe benefits are found in section 17.3
of the FBTAA 1986 (Raftery).
h) Fringe Benefit on the Payment for Tom’s Membership to the Sales Managers’
Organisation
Montgomery’s Pty Ltd will not pay any FBT on the $650 membership fees. Professional
membership subscriptions’ fringe benefits are exempted from tax (Clement, et al.). This is a type
1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The professional
membership subscriptions’ fringe benefits are found in section 20.2 of the FBTAA 1986.
i) Fringe Benefit on Providing the Access to Daily Newspapers in the Office
The daily newspapers in the office are not part of the fringe benefits because it is a cost to
the firm that enables it to check its competitors’ prices, which is a benefit to the organization.
j) Fringe Benefit on Brad’s Reception of a Prepaid Visa Card for $280
The employer will pay FBT on the Christmas gift that is $280. This is a type 1 benefit,
since, Montgomery’s Pty Ltd is eligible for a GST credit. The Christmas gift falls under the
expense entertainment allowance fringe benefits on the special legislative provisions found in
section 19.5 of the FBTAA 1986.
g) Fringe Benefit on Brad’s Purchase of a New Desktop Non-Portable Computer
Montgomery’s Pty Ltd selling price to the public = $3,000. Brad purchase price = $2,500.
According to Cortis and Christine, the computer falls under the retail goods (identical) because
the firm sells computers, hence, the computer’s fringe benefit = (75% X $3,000) - $2,500 =
$2,250 - $2,500 = $-250. The retail goods (identical) fringe benefits are found in section 17.3
of the FBTAA 1986 (Raftery).
h) Fringe Benefit on the Payment for Tom’s Membership to the Sales Managers’
Organisation
Montgomery’s Pty Ltd will not pay any FBT on the $650 membership fees. Professional
membership subscriptions’ fringe benefits are exempted from tax (Clement, et al.). This is a type
1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The professional
membership subscriptions’ fringe benefits are found in section 20.2 of the FBTAA 1986.
i) Fringe Benefit on Providing the Access to Daily Newspapers in the Office
The daily newspapers in the office are not part of the fringe benefits because it is a cost to
the firm that enables it to check its competitors’ prices, which is a benefit to the organization.
j) Fringe Benefit on Brad’s Reception of a Prepaid Visa Card for $280
The employer will pay FBT on the Christmas gift that is $280. This is a type 1 benefit,
since, Montgomery’s Pty Ltd is eligible for a GST credit. The Christmas gift falls under the
expense entertainment allowance fringe benefits on the special legislative provisions found in
section 19.5 of the FBTAA 1986.
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Surname 5
k) Fringe Benefit on Taking Brad Home by Taxi on Medical Grounds
Montgomery’s Pty Ltd paid $96 for the taxi services, which is a fringe benefit. According
to Senasi and Samihah, the total firm’s contribution to the worker’s medical expenses is an
assessable fringe benefit. This is a type 1 benefit and is found in section 58 of the FBTAA 1986.
l) Fringe Benefit on Providing Brad with Parking in the Centre’s Parking Lot
The parking fringe benefits that Montgomery’s Pty Ltd provides to Brad at the shopping
Centre cannot be reported for taxation purposes. According to the Australian Taxation Office,
the car parking fringe benefits are among the 'excluded benefits'.
m) Fringe Benefit on Providing the New Marketing Director with a BMW X5
The formula for the car’s taxable value is as follows (Hodgson and Prafula).
A x B x C
D
Where A = the cost base of the car
B = the legal percentage
C = FBT days in a year that the worker used the car for private reasons
D = days in an FBT year
Hence, from the question, A= $160,000
B = 47% starting from 1 April 2017 to 31 March 2018 (Australian Taxation Office).
C = 31 days that the new marketing director used the car for private reasons (day of purchase to
the last day that she used it)
k) Fringe Benefit on Taking Brad Home by Taxi on Medical Grounds
Montgomery’s Pty Ltd paid $96 for the taxi services, which is a fringe benefit. According
to Senasi and Samihah, the total firm’s contribution to the worker’s medical expenses is an
assessable fringe benefit. This is a type 1 benefit and is found in section 58 of the FBTAA 1986.
l) Fringe Benefit on Providing Brad with Parking in the Centre’s Parking Lot
The parking fringe benefits that Montgomery’s Pty Ltd provides to Brad at the shopping
Centre cannot be reported for taxation purposes. According to the Australian Taxation Office,
the car parking fringe benefits are among the 'excluded benefits'.
m) Fringe Benefit on Providing the New Marketing Director with a BMW X5
The formula for the car’s taxable value is as follows (Hodgson and Prafula).
A x B x C
D
Where A = the cost base of the car
B = the legal percentage
C = FBT days in a year that the worker used the car for private reasons
D = days in an FBT year
Hence, from the question, A= $160,000
B = 47% starting from 1 April 2017 to 31 March 2018 (Australian Taxation Office).
C = 31 days that the new marketing director used the car for private reasons (day of purchase to
the last day that she used it)
Surname 6
D = days between 1 May 2017 (when her contract commences) to 31 March 2018 (when her
contract ends) = 335 days
Taxable value = $160,000X 47% X 31 days = $6,959
335 days
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The car
fringe benefit rates on the cars an employer offers to a worker for specific days in a year are
found in section 7.1 of the FBTAA 1986 (Hodgson and Prafula).
n) Fringe Benefit on the Benefits to General Staff
Fresh Fruit to the Staff
The firm has10 staff members. Fringe benefit for the year ending 31, March 2018 is
$1,363 as follows. For 4 adults $619 and the 6 adults is $124 X 6 weekly (Australian Taxation
Office). Therefore, yearly is $1,363 X 52 weeks, which is a total of $70,876. Hence, all the
$5,600 per year is the fresh fruit fringe benefits. The employer pays FBT on the share that relates
to his or her worker’s Christmas party only or the worker’s associates (Raftery). In this case, the
taxable value is for the 10 staffs and their spouses, which is 20 individuals each at $150, which
comes to $3,000. Two junior staff tertiary studies’ Fringe benefit is $1,825 per student X 2,
which is $3,650. The parking fringe benefits that Montgomery’s Pty Ltd provides to the branch
manager and 2 other staff members under the firm’s building cannot be reported for taxation
purposes. According to the Australian Taxation Office, the car parking fringe benefits are among
the 'excluded benefits'. All these are type 1 benefits, since, Montgomery’s Pty Ltd is eligible for
a GST credit.
D = days between 1 May 2017 (when her contract commences) to 31 March 2018 (when her
contract ends) = 335 days
Taxable value = $160,000X 47% X 31 days = $6,959
335 days
This is a type 1 benefit, since, Montgomery’s Pty Ltd is eligible for a GST credit. The car
fringe benefit rates on the cars an employer offers to a worker for specific days in a year are
found in section 7.1 of the FBTAA 1986 (Hodgson and Prafula).
n) Fringe Benefit on the Benefits to General Staff
Fresh Fruit to the Staff
The firm has10 staff members. Fringe benefit for the year ending 31, March 2018 is
$1,363 as follows. For 4 adults $619 and the 6 adults is $124 X 6 weekly (Australian Taxation
Office). Therefore, yearly is $1,363 X 52 weeks, which is a total of $70,876. Hence, all the
$5,600 per year is the fresh fruit fringe benefits. The employer pays FBT on the share that relates
to his or her worker’s Christmas party only or the worker’s associates (Raftery). In this case, the
taxable value is for the 10 staffs and their spouses, which is 20 individuals each at $150, which
comes to $3,000. Two junior staff tertiary studies’ Fringe benefit is $1,825 per student X 2,
which is $3,650. The parking fringe benefits that Montgomery’s Pty Ltd provides to the branch
manager and 2 other staff members under the firm’s building cannot be reported for taxation
purposes. According to the Australian Taxation Office, the car parking fringe benefits are among
the 'excluded benefits'. All these are type 1 benefits, since, Montgomery’s Pty Ltd is eligible for
a GST credit.
Surname 7
Summary
Type 1 Benefits
Superannuation = $3,125.00
New audi sedan = $2,115.00
Entertainment allowance = $3,000.00
Home internet and mobile telephone expenses = $350.00
Low-interest loan = $937.50
Non-portable computer = $-250.00
Prepaid visa card = $280.00
Taxi on medical grounds = $96.00
BMW X5 = $6,959.00
Fresh fruit = $5,600.00
Christmas party = $3,000.00
Two junior staff / Education = $3,650.00
Total 28,862.50
Type 2 Benefits = 0
Exempt
Tom’s membership= $650
Summary
Type 1 Benefits
Superannuation = $3,125.00
New audi sedan = $2,115.00
Entertainment allowance = $3,000.00
Home internet and mobile telephone expenses = $350.00
Low-interest loan = $937.50
Non-portable computer = $-250.00
Prepaid visa card = $280.00
Taxi on medical grounds = $96.00
BMW X5 = $6,959.00
Fresh fruit = $5,600.00
Christmas party = $3,000.00
Two junior staff / Education = $3,650.00
Total 28,862.50
Type 2 Benefits = 0
Exempt
Tom’s membership= $650
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Surname 8
Workings
1. Expense Payments
Expense payments = Christmas gift of $280 and Christmas party of $3,000, which totals to
$3,280
2. Other Benefits (Residual)
Superannuation = $3,125.00
Home internet and mobile telephone expenses = $350.00
Non-portable computer = $-250.00
Taxi on medical grounds = $96.00
Two junior staff/ Education = $3,650.00
Total $6,971.00
Workings
1. Expense Payments
Expense payments = Christmas gift of $280 and Christmas party of $3,000, which totals to
$3,280
2. Other Benefits (Residual)
Superannuation = $3,125.00
Home internet and mobile telephone expenses = $350.00
Non-portable computer = $-250.00
Taxi on medical grounds = $96.00
Two junior staff/ Education = $3,650.00
Total $6,971.00
Surname 9
Works Cited
Australian Taxation Office. “Reportable Fringe Benefits – Facts for Employees.” Retrieved on
04.10.2018 from https://www.ato.gov.au/General/Fringe-benefits-tax-(fbt)/In-detail/
Employees/Reportable-fringe-benefits---facts-for-employees/
Australian Taxation Office. “Fringe Benefits Tax – Rates and Thresholds.” Retrieved on
04.10.2018 from https://www.ato.gov.au/Rates/FBT/
Braverman, Daniel, Stephen Marsden, and Kerrie Sadiq. "Assessing Taxpayer Response to
Legislative Changes: A Case Study of In-House Fringe Benefits Rules." J. Austl. Tax'n17
(2015).
Caplow, Theodore. The Academic Marketplace. Routledge, 2017.
Clement, R. Carter, et al. "Fringe Benefits among U.S. Orthopedic Residency Programs Vary
Considerably: A National Survey." HSS Journal® 12.2 (2016).
Cortis, Natasha, and Christine Eastman. "Salary Sacrificing in Australia: Are Patterns of Uptake
and Benefit Different in the Not‐for‐Profit Sector?" Asia Pacific Journal of Human
Resources 53.3 (2015).
Hodgson, Helen, and Prafula Pearce. "TravelSmart or Travel Tax Breaks: Is the Fringe Benefits
Tax a Barrier to Active Commuting in Australia? 1." eJournal of Tax Research 13.3
(2015).
Prince, Jimmy B. Tax for Australians for Dummies. John Wiley & Sons, 2016.
Raftery, Adrian. 101 Ways to Save Money on Your Tax-Legally! 2017-2018. John Wiley & Sons,
2017.
Works Cited
Australian Taxation Office. “Reportable Fringe Benefits – Facts for Employees.” Retrieved on
04.10.2018 from https://www.ato.gov.au/General/Fringe-benefits-tax-(fbt)/In-detail/
Employees/Reportable-fringe-benefits---facts-for-employees/
Australian Taxation Office. “Fringe Benefits Tax – Rates and Thresholds.” Retrieved on
04.10.2018 from https://www.ato.gov.au/Rates/FBT/
Braverman, Daniel, Stephen Marsden, and Kerrie Sadiq. "Assessing Taxpayer Response to
Legislative Changes: A Case Study of In-House Fringe Benefits Rules." J. Austl. Tax'n17
(2015).
Caplow, Theodore. The Academic Marketplace. Routledge, 2017.
Clement, R. Carter, et al. "Fringe Benefits among U.S. Orthopedic Residency Programs Vary
Considerably: A National Survey." HSS Journal® 12.2 (2016).
Cortis, Natasha, and Christine Eastman. "Salary Sacrificing in Australia: Are Patterns of Uptake
and Benefit Different in the Not‐for‐Profit Sector?" Asia Pacific Journal of Human
Resources 53.3 (2015).
Hodgson, Helen, and Prafula Pearce. "TravelSmart or Travel Tax Breaks: Is the Fringe Benefits
Tax a Barrier to Active Commuting in Australia? 1." eJournal of Tax Research 13.3
(2015).
Prince, Jimmy B. Tax for Australians for Dummies. John Wiley & Sons, 2016.
Raftery, Adrian. 101 Ways to Save Money on Your Tax-Legally! 2017-2018. John Wiley & Sons,
2017.
Surname 10
Senasi, Vally, and Samihah Khalil. "Implementation of Minimum Wage Policy in Malaysia:
Manufacturing Employers’ Perceptions of Training Provision and Fringe
Benefits." International Journal of Humanities and Social Science 5.12 (2015).
Senasi, Vally, and Samihah Khalil. "Implementation of Minimum Wage Policy in Malaysia:
Manufacturing Employers’ Perceptions of Training Provision and Fringe
Benefits." International Journal of Humanities and Social Science 5.12 (2015).
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