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Tax Assessment Act 1986 | Taxation

   

Added on  2020-05-16

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Running head: TAXATIONTaxationName of the student:Name of the university:Author note

1TAXATIONTable of ContentsAnswer to question 1..................................................................................................................2Answer to question 2..................................................................................................................6Part (a) answer:.......................................................................................................................6Part (b) answer:.......................................................................................................................7Part (c) answer:.......................................................................................................................8Part (d) answer:.......................................................................................................................9Reference:................................................................................................................................10

2TAXATIONAnswer to question 1The term Fringe benefit can be defined as an additional amount that can beprovided to the employee or to the worker except their salary or remuneration. These extraamounts are helping the employers to recruit more employees and motivate the oldemployees. Taxes on the basis of these fringe benefits are assessed by Fringe Benefit TaxAssessment Act 1986. It is obvious to state that there must be certain employee and employerrelation in between the beneficiary and benefit provider. However, it should be understoodthat there are various kinds of fringe benefits present under the law. This case study isdepending on the car related fringe benefit. Car fringe benefits are provided under section 7 of the Fringe Benefit TaxAssessment Act 1986. If a car is given to an employee for use it for his or her professionaluse, it can be called as professional benefits. On the contrary, if the employer allows anemployee to use that car for his personal use, that will be termed as fringe benefit and the carwill come under the parlance of the fringe tax benefit. In certain circumstances, if theemployee does not use the car personally, but the car is available for the personal or privateuse, that will also count as fringe benefit and tax will also assess in that case (Braverman etal., 2015). There are two methods by which a fringe benefit tax can be assessed such asstatutory method and operating cost process. The process of statutory method has beenprescribed under the Fringe Benefit Tax Assessment Act 1986 and section 9 of the Act hasprovided all the calculating process of the methods. However, the tax rate for the car underthe statutory formula depends on the cost of the car. On the other hand, the operating costformula has been stated under section 10A and 10B of the Act. The main considerableportion under this process is the taxable value of the cost that has been spent for the

3TAXATIONoperational purpose of this car. The rate of the tax is being determined on the basis of thelowest taxable values of the fringe benefits. However, in case of both the methods, all therelated documents are to be maintained properly to avoid all the future dilemmas. It has been learnt from the case that the car given to Charlie are being used forprivate use also besides the professional purpose and according to the provision of the FringeBenefit Tax Assessment Act 1986, Charlie is liable to pay fringe benefit tax for the sedantherefore. The car has been provided to him by the Shiny Homes Pty Ltd and therefore, thereis fair provision to include the car under the fringe benefit tax. Based on the above mentioned facts, it can be stated that both the methods will beapplied on the car to evaluate its taxation rates as per the provision of the Fringe Benefit TaxAssessment Act 1986. The taxable value of the car should be calculated by assuming thestatutory rate as 20% and this percentage should be treated as the base value of the car andthe figure should be resulted after multiply the percentage with the rear base value of the car.However, certain kilometres has been mentioned in this case that is covered by the car is notat all reliable in case of statutory method. In case of operating cost method, the operating costof the car should be separated in case of the work related matters and private use of the car.Therefore, the taxable values in both the cases should be different in nature.

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