Fringe Benefits Tax (FBT) Liability Analysis: Tax Law Assignment

This assignment solution addresses the FBT liabilities of Electro Specialists Pty Ltd. The analysis examines whether the company has an FBT liability for providing a vehicle to Harry and paying for his mobile phone. It calculates the taxable value of the car benefit using the operating cost method, considering expenses like repairs, interest, depreciation, insurance, and fuel, and accounts for private and business use. The mobile phone benefit is also evaluated. The solution determines the total FBT liability and assesses whether Harry has a reportable fringe benefit, providing the amount to be reported on his PAYG payment summary. Relevant sections of the Fringe Benefits Tax Assessment Act 1986 are referenced to support the analysis.

Running head: TAX
Tax
Name of the Student
Name of the University
Author Note

1TAX
Issue 1
Whether Electro Specialists Pty Ltd has an FBT liability in respect of providing the vehicle to Harry and
for paying Harry’s Telstra mobile phone bill.
Fringe benefits has been defined under s 136(1) of the FBTAA 1986, which requires five elements to be
satisfied for the purpose of rendering it to be a fringe benefit, viz.
 Existence of a benefit.
 Extended within the year.
 By the employer or any person authorized by him
 To be employee or any other associated individual.
 In pursuant to the employment.
Expense fringe benefit is said to have arisen as in s 20 of the FBTAA 1986 and can arise in two forms,
 Employee gets a reimbursement of the amount he incurred as an expense.
 The employer make payment to the creditor directly.
In this situation the car can be treated as a fringe benefit as it has been provided to Harry by the Electro
Specialists Pty Ltd. It has been provided on 01.11.2018 and hence can be said to have extended within the
year. It has been extended by the company to Harry and for being used both for private and office use.
Car fringe benefit arises as in s 7(1) of the FBTAA 1986 when,
 Car
 In relation to employment
 Owned by employer
 Available to employee for private use.
Taxable value under FBT for car

2TAX
Operating Cost Method
OPERATING
COST METHOD
Particulars
Am
ount
Am
ount
REP
AIRS 0
INT
EREST
97
6
Depreciatio
n
46
95
INSURANCE
50
0
FUE
L
40
00
TOTAL OPERATING
COST
10
171
PRIVATE
USE
TOTAL
KILOMETER
10
000
WORK USE
40
00
PRIVATE
USE
60
00
PERCENTAGE OF
PRIVATE USE 60
Taxable value of FBT
(TOC*PRIVA
TE USE)
61
02
Deemed
Depreciation
Am
ount
Car Base
Value
454
00
Less Employee
contribution 0
T
R
2011/3

3TAX
Base Value
454
00
Depreciatio
n rate
25
%
Deemed
Depreciation
(BV*25%*15
1)/365
469
5
Deemed
Interest
Am
ount
Car Base
Value
454
00
Less Employee
contribution 0
T
R
2011/3
Base Value
454
00
Statutory Interest
rate
5.2
0%
T
D
2018/2
Deemed
Interest
(BV*5.2%*1
51)/365 976
Base Value = $42000 + $400 + $3000 = $45400
Taxable value under FBT for mobile phone
Cost 2200
Less: Business Use (30%) 330
1870
Less: Contribution 0
Taxable Value 1870
Taxable value for car = $6102
Taxable value for mobile = $1870

4TAX
Therefore, FBT liability = (6102 + 1870) * 2.0802 * 47% = $7794
Electro Specialists has a FBT liability of $7794
Issue 2
Whether Harry would have a reportable fringe benefit in respect of the vehicle provided to him and the
mobile phone payment by Electro Specialists.
As the fringe benefit amount is greater than $2000, there will be a reportable fringe benefit.
Amount that will be reported on Harry’s PAYG payment summary will be $7794.

5TAX
Reference
The Fringe Benefits Tax Assessment Act 1986