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Fringe Benefit tax Assessment Act 1986 : Case Study

   

Added on  2020-05-28

11 Pages1700 Words91 Views
Running head: TAXATIONTaxationName of the Student:Name of the University:Authors Note:

1TAXATIONTable of ContentsAnswer 1..........................................................................................................................................2Answer 2..........................................................................................................................................7A...................................................................................................................................................7B...................................................................................................................................................8C...................................................................................................................................................9D...................................................................................................................................................9References:....................................................................................................................................10

2TAXATIONAnswer 1As stated by the rules the Fringe Benefit tax Assessment Act 1986 fringe benefits are thosebenefits which the employer pays to the employees other than actual wages and salary. Theprovisions in relation to fringe benefits would only be applicable when it can be established thatthe relationship between the provided and receiver is that of an employer and employee. Onlywhen the relationship has been established the rules provided through the FBTA in relation totax liability of both employer and employee towards such benefits can be availed. The rules and regulations of determining a car fringe benefit are stated via the fringe benefitlegislation specifically section 7. In this section it is ruled that whether the car is deployed formaking personal use by the employee of a person in relation with the employee is not relevant.The only mandatory requirements is that the car has been given to the employee to makepersonal use by the employee or any one in relation. There are two ways which may be deployed to calculate the FBT of a car. One of the way isStatutory way and the other way is operating cost way. The consideration of cost and operatingcost is done respectively by the processes to calculate the FBT. The FBT should be determinedthrough the use of the method through which the lowest taxable value is provided. However ithas to be considered that for the purpose of using operating cost method a person should alwaysmaintain all relevant documents. Case study situation

3TAXATIONIn the Case study situation , it is provided that a sedan (the car for which the fringe benefits tax isrequired) has been provided to Charlie by Shiny Homes Pty Ltd. It is visible via the facts that thecar in the given situation had been given to make private use (wedding) and it has been actuallyused for private purpose by Charlie alongside employment purposes. Therefore it can be statedthat the car which have been allocated to Charlie by his employer is eligible to be assessed underfringe benefits taxes. As discussed above either the statutory formula method or the operating cost method canbe used for the purpose of calculating the taxable value in relation to fringe car benefits. Inrelation to the statutory formula method the calculation of taxable value of car fringe benefits isdone through the use of 20 percent statutory rate (Braverman et al. 2015). In the budget of 2011,20% have been affixed as the statutory rate in relation to all kind of cars. Thus for the purpose offinding out the taxable value of fringe benefits the 20% statutory rate is multiplied by the car’sbase value. The extent to which the car has been used in a private manner by the employee is notconsidered for the purpose of finding out taxable value of fringe benefits with respect to thestatutory formula method. In relation to the operating cost method proportionate segregation ofthe total operational cost is done under the category of private purpose and work purpose to findout the taxable value of fringe benefits. Statutory method

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