Taxation Law: FBT Liability and Capital Gains/Losses

TAXATION LAW
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Question 1
The key objective is to ascertain the FBT liability that would arise for Spiceco Pty Ltd on
account of providing a car to their employee Lucinda for private use. The key aspects
related to the computation of car fringe benefit have been discussed below in wake of
the information provided.
Depreciation
With regards to s. 11-1 Fringe Benefit Tax Assessment Act, 1986 (FBTAA 1986), the
depreciation can be computed based on the formula listed below (Deustch et. al., 2016).
The effective life of the car is considered as 8 years while the diminishing depreciation
would be applied @25% p.a.
Based on the given information, Lucinda was given the car on April 1, 2018 and thereby
C and D both would be equal to 365 days. The value for input A would be equal to the
cost of the car which is $ 18,000.
Hence, depreciation on the car for 2018-2019 = 18000*(0.25)*(365/365) = $4,500
Interest
The formula for interest computation has been highlighted in ss. 11-2 FBTAA 1986 and
has been outlined below (Sadiq et. al., 2016).

In the given case, A = $ 18,000 (cost of car) ,C=D = 365 days (as car was given on first
day of the financial year and was available through the year), B = 5.20% (As per
TD2018/2) (Barkoczy, 2018).
Hence, interest = 18000*(5.2/100)*(365/365) = $ 936
Total Operating costs
As per ss. 10-3 FBTAA 1986, the operating cost for the car for 2018-2019 can be
computed as shown below (Gilders et. al., 2016).
Total Operating costs = Repairs ($ 3,300) + Insurance ($2,200) + Fuel ($990) +
Depreciation ($4,500) + Interest ($ 936) = $ 11,926
It is assumed in the above computation that insurance paid is for 2018/2019 only.
Taxable Value
Taxable value for the car the car fringe benefits can be computed based on the
following two approaches that are available.
1) Cost basis (ss. 10-2 FBTAA 1986)
The relevant formula to be used to compute the taxable value of car fringe benefit under
this approach is given below (Woellner, 2014).