Fringe Benefits Tax in Australia

This assignment delves into the complexities of Australian Fringe Benefits Tax (FBT) legislation. It examines various aspects of FBT, including its application to fringe benefits like car usage and travel expenses. The analysis incorporates relevant case laws and legal interpretations to illustrate how FBT operates in real-world scenarios.

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Issue.................................................................................................................................................2
Legislation.......................................................................................................................................2
Application......................................................................................................................................3
Car FBT Determination...............................................................................................................3
Employment Duties of an Itinerant Nature..................................................................................6
Fringe Benefit Tax for Car Parking.............................................................................................7
Fringe Benefit Tax on Accommodation......................................................................................7
Charlie and Shiny Homes Fringe Benefit Tax Consequences.....................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Issue
In this report, the main issue is to determine the consequences of fringe benefits of Shiny
Homes and Charlie. The provided case states that Charlie works as a real estate agent and is
employed in Shiny Homes Pty Ltd. Shiny Homes is involved in the landscaping business and the
company has provided Charlie with a 4-wheel drive sedan. According to Section 6 of the
Miscellaneous Taxation Rulings and Fringe Benefit Tax Assessment Act 1986, there are
certain circumstances where fringe benefits tax will be levied on car.
Legislation
The relevant legislation in this case is mentioned below:
 Section 6 of the Miscellaneous Taxation Rulings and Fringe Benefit Tax Assessment Act
1986
 Taxation rulings of MT 2027
 Sub-section 136
 Sub-section 136 (1)
 Section 51 of the Income Tax Assessment Act 1997
 Sub-division F of Division 3
 Lunney and Hayley v FCT (1958)
 Newsom v Robertson (1952) 2 All ER 728; (1952)
 Simon in Taylor v Provan (1975) AC 194
 Section 5 of the Fringe Benefit Tax Act 1986
 Tubemakers of Australia Ltd v. FC of T 93

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Application
Car FBT Determination
It is stated in taxation rulings of MT 2027 private use under sub-section 136 (1) that any
kind of use by the employees that is not for the purpose of generating assessable income will be
considered as Private Use. Sub-section 136 (1) includes valuation method of operating cost of
the business journey of the cars that is not associated with the private use. It is defined under
Paragraph 3 of the Miscellaneous Taxation Ruling that in order to determine the operating cost
of the cars, it is required to write down the kilometer travelled by the car for the personal use of
the employees in a particular logbook or any kind of similar documents (Lowe, 2014). It can be
seen in the provided case study that Charlie travelled a total of 50000 kilometer for his work
purpose. In order to determine the fringe benefit of the car used by Charlie, there will be
application of operational cost valuation method as per Sub-section 136 (1) of the
Miscellaneous Taxation Rulings of 2027 (Lignier & Evans, 2012).
There is a criticality in determining the business and private use. Thus, it is needed to
determine whether the employee uses the car or the associates for the generation of the
employee’s assessable income (Evans & Kerr, 2012). In this situation, as per Sub section 136
(1), this process includes the use of the car by the employee in order to generate assessable
income or to perform the business activities in order to generate the assessable income of the
business organization (Mountain & Szuster, 2014). This process also includes the use of the car
by the employee that the employer has provided to him in order to carry on the business
activities and this is eligible under Fringe Benefit Tax. In addition, the use of the car by the
associate of the employee and is carried out by the employee will also be considered for the use
of business purpose. As per the provided scenario, it can be seen that Charlie used the car

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provided by his employer in order to carry on the business activities. In this situation, it needs to
be mentioned that Charlie used the car for the generation of assessable income of both him and
the company. Thus, this is applicable for Fringe Benefit Tax (Evans, Lignier & Tran-Nam,
2013).
The main aim of this report is to determine the private and business use of the car for the
generation of assessable income under the income tax ruling and it is also needed to determine
that whether car related expenses will be subject to deduction under section 51 of the Income
Tax Assessment Act 1997 (Braithwaite, 2017). As per various evidences of the case study, it can
be seen that all the expenses of Charlie on the use of the car is related with employment and thus,
it is allowable for deduction for income tax. In order to determine the difference between the
Fringe Benefit Tax for private use and employment use, it is needed to determine that whether
the car expenditures by Charlie for the car will be considered as allowable deduction or not under
income tax act (O'Connell, Martin & Chia, 2013).

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In consideration with the provided case study of Charlie and Shiny Homes, the principles
and guidelines of Miscellaneous Taxation Rulings of 2027 are most relevant under Income Tax.
In this situation, it needs to be mentioned that as per the rulings of Sub-division F of Division 3,
the incurred car expenses of Charlie and Shiny Homes is subject to income tax deduction.
The Taxation rulings of IT 112 and the verdict in the case of Lunney and Hayley v FCT
(1958) state that the travel between the workplace and the home of the employees will be
considered as ordinary private travel (Cornish & Lock, 2015). For the generation of assessable
income, travelling to work is necessary pre-requisite and it is essential for earning of income. For
this reason, the kilometer travelled by Charlie from his home to the workplace will be considered
as private travel and the various course of employment will not change the course of the result.
Hence, the workplace and employment is essential for this purpose. As per the verdict in
Newsom v Robertson (1952) 2 All ER 728; (1952), the barrister’s cost while travelling from
home to office would be considered as office expenses (Samuel, 2013). As per the court’s
verdict, the travelling of the barrister from home to chamber or to other courts would not be
considered as expenses.

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Employment Duties of an Itinerant Nature
For a long period, it has been acknowledged in taxation that the travel of the employees
from home to workplace needs to be considered as business travel as it is inherently itinerant. As
per the verdict in Simon in Taylor v Provan (1975) AC 194, travel of Charlie needs to be
considered as travel expenses as it is one of the major fundamental parts of his job. Moreover, as
per the job requirement, Charlie has to travel to different places in order to discharge his
employment duties (Mathieson, 2016).
The ruling of FBT Act 1986 states that Charlie was using the car partly for his business
and partly for his private purpose. Different incurred cost of Charlie on his cars is petrol, repairs,
insurance, maintenance and registration. Thus, for the purpose of FBT deduction, Charlie is
eligible to claim the business related portion of his car expenses like petrol and repairs as it is
used to generate assessable income (O'Connell, Martin & Chia, 2013).

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Fringe Benefit Tax for Car Parking
Car parking fringe benefit can be applied in case the employee gets car parking facility
from the employer and the following factors are satisfied:
 The employee parks the car in the premise that is owned or leased by the employer or the
provider of the car.
 The employee parks the car for more than four hours.
 Employer owns the car under the control of the employees.
 The car is giver for the employment of the employee.
 For a minimum of one day, the employee uses the car to go from home to office and
office to home.
 The employee parks the car in a commercial parking station for a charge or fee and the
place is within one kilometer of the premise radius.
Based on the above discussion, it needs to be mentioned that the car of Charlie was parked in
a secure parking station for which he gets $200 each week from Shiny Homes. It can be seen
that was parked in Charlie’s garage that is under the control of the provider. In addition, the car
was given to Charlie for employment purpose and he used the car for home to work and work to
home for daily basis. For all these reasons, Charlie is eligible to claim the Fringe Benefits and
Shiny Homes is eligible to claim deduction for car parking fees under on the behalf of the
employee (Hodgson & Pearce, 2015).
Fringe Benefit Tax on Accommodation
As per Fringe Benefit Tax Act 1986, there are certain forms of entertainment under the
provision of entertainment that are in the form of drink or recession, travel or accommodation

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with entertainment and others (Jeremenko, 2014). As per the provided case, Charlie was unable
to use the car for two weeks as he had a minor accident. This happened prior to Charlie’s
wedding and the company decided to hire the car for allowing him to go for honeymoon. In
addition, Shiny Home paid for the accommodation of Charlie’s honeymoon. This is related with
the fringe benefits tax and occurs tax liability for the provision of entertainment. Thus, based on
the above discussion, it can be said that Shiny Homes is eligible to claim deduction and Charlie
has to show this allowance in his tax return as income.
Charlie and Shiny Homes Fringe Benefit Tax Consequences
The tax regulation of TR 94/25 is applicable for the employer and the employer is liable
under section 5 of the Fringe Benefit Tax Act 1986. Thus, under subsection 51 (1) of the
Income Tax Assessment Act 1936, the employer is eligible for claiming fringe benefits tax. In
this regard, subsection 51 (1) is concerned with the fringe benefits installment and timings. As
per TR 94/25, fringe benefits are incurred for the gaining of assessable income and it is subject to
tax deduction under subsection 51 (1) of the ITAA (Tang & Wan, 2015).
The Fringe Benefits tax liability for Shiny Homes generates under the commonwealth
legislation. As per section 5 of the Fringe Benefit Tax Act 1986, based on the fringe benefits
taxable sums, the taxes are generally imposed. According to the verdict of Tubemakers of
Australia Ltd v. FC of T 93, Fringe Benefits Taxable sums includes various fringe benefits
provided by Shiny Homes to Charlie (Barnett & Harder, 2014).
Thus, it can be seen that Shiny Homes has incurred different expenses like honeymoon
accommodation, cost to hire the car and others in order to generate assessable income. Hence, as
per subsection 51 (1) of the ITAA 1997, all the expenses incurred by Shiny Homes is for the

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purpose to generate the assessable income and for this reason, Shiny Home is eligible to claim
allowable deduction for expenses (Martin, 2015).
Conclusion
Based on the above discussion, it can be concluded that all the fringe benefits related
events are taxable under FBT Act 1986. Various parts of this report take into account the
application of different case laws in order to arrive to the decision regarding the car fringe
benefits.

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References
Barnett, K., & Harder, S. (2014). Remedies in Australian private law. Cambridge University
Press.
Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion.
Routledge.
Cornish, A., & Lock, H. (2015). Transport, accommodation and meals: FBT tricks and traps. Tax
Specialist, 19(2), 58.
Evans, C., & Kerr, J. (2012). Tax Reform and'Rough Justice’: Is it Time for Simplicity to Shine?.
Evans, C., Lignier, P., & Tran-Nam, B. (2013). Tax compliance costs for the small and medium
enterprise business sector: Recent evidence from Australia. Tax Administration Research
Centre University of EXETER Discussion Paper, 003-13.
Hodgson, H., & Pearce, P. (2015). TravelSmart or travel tax breaks: is the fringe benefits tax a
barrier to active commuting in Australia? 1. eJournal of Tax Research, 13(3), 819.
Jeremenko, R. (2014). Temporary budget repair levy: Adding complexity. Taxation in
Australia, 49(1), 5.
Lignier, P., & Evans, C. (2012). The rise and rise of tax compliance costs for the small business
sector in Australia.
Lowe, M. (2014). Obesity and climate change mitigation in Australia: overview and analysis of
policies with co‐benefits. Australian and New Zealand journal of public health, 38(1),
19-24.

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Martin, F. (2015). Overseas travel by employees: When does FBT apply?. Taxation in
Australia, 49(7), 382.
Mathieson, A. C. (2016). Rapid assessment survey of fouling and introduced seaweeds from
southern Maine to Rhode Island. Rhodora, 118(974), 113-147.
Mountain, B., & Szuster, P. (2014). Australia's million solar roofs; disruption on the fringes or
the beginning of a new order?'. Distributed Generation and its Implications for the Utility
Industry, 1.
O'Connell, A., Martin, F., & Chia, J. (2013). Law, policy and politics in Australia's recent not-
for-profit sector reforms. Austl. Tax F., 28, 289.
Samuel, G. (2013). Law of Obligations & Legal Remedies. Routledge.
Tang, R., & Wan, J. (2015). Fringe benefits tax and fly-in fly-out arrangements: John Holland
Group Pty Ltd v Commissioner of Taxation. Australian Resources and Energy Law
Journal, 34(1), 17.

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