Taxation Law

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

1TAXATION LAW
Answer 1
In the concerning circumstances, the issue is the determination of the FBT imposed
pertaining to Spiceco Pty Ltd with respect to the car that they have extended to Lucinda
during the FBT year 2018/19. The computation of the FBT liability through the various
methods of FBT computation and the suggestion of the most appropriate method that ensures
the minimisation of the FBT liability pertaining to Spiceco Pty Ltd.
U/s 136 of the FBTAA86, any value that has been extended by an employer to an
employee or any person related with the employee or any other third person who has been
extended with the value under any arrangement between the employer and the employee, in
the furtherance or by virtue of the employment in a particular income tax year is required to
be termed as the fringe benefit. The value that has been extended may be of several forms. It
can come in the form of a right or even an interest that has been extended pertaining to the
real or a personal property. It can also be extended in the form of a facility or a perquisite that
has been advanced towards the employer will also be included in this form of benefit.
However, when any such value extended by the employer the needs to be subjected to
taxation within the assessable income of the employer only. This imposes upon an employer
a fringe benefit tax for the fringe benefit that has been extended to the employee. The fringe
benefit may accrue with respect to any value that has been extended to the towards any past,
present as well as future employee (Barkoczy 2016).
A fringe benefit that has been accrued to an employer with respect to a car that he has
provided to the employee for being used by the employee in a private capacity is required to
be treated as a car fringe benefit u/s 7 of the FBTAA86. The car fringe benefit would likewise
be included in the tax liability of the taxpayer.

2TAXATION LAW
The FBTAA86 provides for two methods for the calculation of a car fringe benefit. U/s
9(1) of the FBTAA86, the statutory method for the computation of the car fringe benefit has
been provided. The formula is:
[0.2 * BV * (n/ tn)] - A
BV = Base value
n = no. of operating days
tn = no. of days in the year of income
C = contribution of the employee
U/s 10(2) of the FBTAA86, the operating cost method for the computation of the car
fringe benefit has been provided. The formula is:
[C * ( 100% - BP)] – R
C = operating cost during the period of holding, which includes maintenance, insurance,
registration and fuel.
BP = business percentage
C = contribution of the employee.
The FBT needs to be calculated in relation to the car fringe benefit by applying the FBT
rate to the taxable value calculated.
In the present situation, Spiceco Pty Ltd has provided a car towards Lucinda for the
purpose of being used for private purpose. This needs to be considered as a fringe benefit that
has been extended to Lucinda who has been employed with Spiceco Pty Ltd and the same
will be taxable in the hands of Spiceco Pty Ltd. This is because u/s 136 of the FBTAA86, any
value that has been extended by an employer to an employee or any person related with the