Taxation Law Assignment: Fringe Benefits

Added on - 28 May 2020

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Running head: TAXATION LAWTaxation LawName of the StudentName of the UniversityAuthors NoteCourse ID
TAXATION LAW1Table of ContentsAnswer to question 1:.................................................................................................................2Case Facts:.................................................................................................................................3Answer to question 2:.................................................................................................................6Answer to part (A):....................................................................................................................6Answer to part (B)......................................................................................................................6Answer to part (c ):....................................................................................................................7Answer to Part (D):....................................................................................................................7Reference List:...........................................................................................................................9
TAXATION LAW2Answer to question 1:According to the“Fringe Benefit Tax Assessment Act 1986”any form of benefit thatis paid to the employees apart from the salaries and wages is regarded as the fringe benefit(Legislation.gov.au, 2018). however, the act lay down that there should be an associationamong the employer and the employee along with the provider of the fringe benefit taxlegislation. This would help in keeping an account of the tax liabilities originating from suchbenefits provided for both the employer and the employee.As laid down under“Section 6 of the FBTAA 1986”car provided to employee by theemployer and the same is used for the private purpose altogether then it would attract carfringe benefit tax (Ato.gov.au, 2018). The car fringe benefit tax is applicable at any time ofthe day in regard to the occupation of the employee for the car held by the person or it istaken to be available for the personal usage of the employee or the associate.As defined under the“sub-section 136 (1) of the taxation ruling MT 2027”usage ofcar by the employee which is not directly related to the course of generating the taxablesalary of the associate would be regarded as the personal use. In order to arrive at theassessable amount of the fringe benefit of the car, the statutory method or the operating costformula is employed. Additionally,“section 10A and Section 10 B of the FBTAA 1986”transacts with the determination of the taxable value of the car based on the operating costmethod (Ato.gov.au, 2018). Under“sub-section 136 (1)”, the method of operating costconsiders the cost that is sustained on the operations of the car and the details of the businessjourneys is required to incorporated in the log book if they are used for ascertaining theproportion of the private use of the car for implementing the operating cost method.
TAXATION LAW3Case Facts:In the present case study, Charlie is the employee of Shiny Homes Pty Ltd and hasbeen provided with the car and the same would be liable for fringe benefit tax under thelegislation. As evident Charlie used the car for both private and business purpose and under“Sub-section 136 (1)”it would attract fringe benefit tax.The decision laid down in the case of“Lunney and Hayley v FCT (1958)”stated thatthe travel from the employee home to the place of work is regarded as the ordinary privatetravel (Ato.gov.au, 2018). Additionally, the travel to the place of work is considered as thenecessary“pre-requisite”.Charlie in this circumstance has travelled kilometres from hishome to the place of work and the same cannot be regarded for fringe benefit since they werenot in the course of generating taxable income. The private kilometres travelled by Charliewould not change the outcome since the place of work is regarded as itinerant in nature.There are two methods involved in computing the assessable amount of the fringebenefit tax namely the“statutory method and the operating cost method”(Deutsch, 2014).The statutory rate for computing the chargeable worth of the fringe benefit of the car is 20%.The statutory percent is multiplied with the base amount of the car in order ascertain theassessable value of the fringe benefits. The degree of private use of the car offered to theemployer is not pertinent in the ascertainment of the assessable amount of the fringe benefitin statutory formula. Whereas under the operating costing method both the work and privatepurpose of the car is separated in determining the assessable amount of the car fringe benefit.The below stated statutory method is employed in determining the value of fringe benefit;Computation of Fringe Benefit Tax under Statutory MethodStatutory methodTaxable value of fringe benefitsParticularAmount ($)Amount ($)
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