Fringe Benefits Tax and Capital Gains Tax Implications

TAXATION LAW
STUDENT ID:
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Question 1
The objective here is to comment and calculate the Fringe Benefits Tax (FBT) liability of
Spiceco Pty Ltd (Employer) for the given fringe benefits (Car) to Lucinda (Employee).
The car has been issued to Lucinda on the same day on which the company has bought
the car i.e. April 1, 2018. The calculation of FBT implication requires some of the factors
that need to be determined based on the provided case information.
Depreciation
The required formula for computing depreciation has been defined in s. 11-1 FBTAA
1986 and is represented below (Austlii,2019).
There is one assumption according to which the effective life of car would be considered
as 8% for the car which has acquired after 2015. Also, the depreciation on the car value
will be applied with the help of the diminishing balance method with an applicable rate of
deprecation as 25% per annum.
Lucida received the car for personal utilization and for professional work on the same
day on which the car was purchased by Spiceco Pty Ltd which means the C and D both
would be 365 days. The payment for car was $18000 and thus, the depreciation amount
on car is shown below.
Interest
The required formula for computing interest has been defined in s. 11-2 FBTAA 1986
and is represented below (Austlii,2019).

Lucida received the car on the day of purchased which means the C and D both would
be 365 days. The payment of car was $18000 and the statutory interest rate is 5.20%
per annum under TD 2018-2. The total interest amount is shown below.
Operating cost
The required formula for computing total operating cost has been defined in s. 10-3
FBTAA 1986 and is represented below (Austlii,2019).
Assumption: The operating cost of the car has been determined conspiring that the
insurance expenses is only for the current financial year. It means that it does not
comprise any future time period payments for the purposes of insurance.
Taxable value
There are two main techniques which would be considered to find the taxable value of
the fringe benefits under the outlines of FBTAA 1986. This taxable value would be used
to determine the net FBT payable for the fringe benefits. The selection of correct
technique is very essential parameter because lowe taxable value of fringe benefits
would also result lower FBT liability on employer. Based, on the understanding, the
technique which would result in lower taxable value for the extended car fringe benefits
would be preferable.
Statutory Formula: The required formula for computing taxable value has been defined
in s. 9 FBTAA 1986 and is represented below (Austlii,2019).