logo

Fringe Benefit Tax Assessment Act 1986: Taxation Law

   

Added on  2020-05-16

12 Pages2130 Words63 Views
Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthor Note

1TAXATION LAWTable of ContentsAnswer 1..........................................................................................................................................2Case facts.........................................................................................................................................3Answer 2..........................................................................................................................................6Part (b).............................................................................................................................................7Part C...............................................................................................................................................8Part D...............................................................................................................................................8Reference List................................................................................................................................10

2TAXATION LAWAnswer 1The additional benefit that the employer provides to the employee other than the wagesand the salary is considered as Fringe Benefits under the Fringe Benefit Tax Assessment Act1986. For the applicability of this provision, the existence of an employment relationship ismandatory between the provider of benefits and the beneficiaries in order to determine the taxliabilities of the employer as well as the employee with respect to such benefits (Hodgson andPearce 2015). According to section 7 of the Fringe Benefit Tax Assessment Act 1986 stipulates thebenefits that can be derived from cars. The provision states that if an employer provides theemployee with a car that the employer personally owns or has obtained it through lease and thecar is allowed to be used for personal purpose, such benefits related to the car gives rise to fringebenefits tax (Gale and Samwick 2014). In the event, the employees or his associates use the carfor private purpose or if it is not used for personal use, the benefits derived from the car shall besubjected to fringe benefits tax. There are two essential methods to determine taxable value of fringe car benefits,namely, the operating cost method and statutory formula method. According to section 9 of theFringe Benefit Tax Assessment Act 1986, the taxable value of car fringe benefits can becalculated as per the statutory method. This method includes the cost of the car in order todetermine the fringe benefits associated with the car. The operating cost method is anothersignificant method that is used to determine the fringe benefits of the car as stipulated undersection 10A and 10B of the FBTAA 1986. The operating cost method involves the operatingcost of the car to measure the taxable value of fringe benefits. It must be comprehended that only

3TAXATION LAWthe method that produces the lowest result should be applied to calculate the fringe benefits ofthe car. Moreover, the relevant documents are necessary while calculating the fringe benefitsusing the operating cost method (Kim, Longest and Lippmann 2015). Case factsIn this case, the employer of Shiny Homes Pty Ltd provided its employee, Charlie with afour-wheel sedan. The car provided to Charlie is defined as a car under the fringe benefits taxlegislation. As per the given facts, the car was permitted to be used for personal purposes of theemployees and Charlie not only used car for personal purposes but also for additional workpurposes. Hence, the car provided to the employee, Charlie, shall be liable for determining fringebenefits associated with the car. The statutory formula method and the operating cost method are essential methods usedto determine the taxable value of the fringe benefits for calculating the FBT (Nijland and Dijst2015). The calculation of the car fringe benefits through the statutory formula method can bedetermined by considering the statutory rate at 20 percent. The base value of the car is multipliedwith the statutory rate of 20% for calculating the taxable value of fringe benefits according to thestatutory formula method. At the time of calculating the fringe benefits associated with the car asper the statutory formula method, it is not required to include the extent to which a car providedby the employer is used for personal purpose. On the other hand, the total operating cost of thecar is equally divided between the work purpose and the personal purpose for determining thetaxable value of fringe benefits.

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Benefits Tax Assessment Act 1986
|13
|2290
|68

HI6028 Assignment Taxation Law - Fringe Benefits
|10
|1595
|150

Case Study - Taxation Law
|10
|1748
|51

Fringe Benefit tax Assessment Act 1986 : Case Study
|11
|1700
|91

Tax Assessment Act 1986 | Taxation
|12
|2474
|56

Australian Taxation Law - PDF
|12
|2448
|99