TAXATION: Analysis of Fringe Benefit Tax for Charlie and Shine Homes

This report analyzes a taxation case study involving Charlie, an agent for Shine Homes Private Limited, and explores the fringe benefit tax (FBT) implications. The core issue revolves around the FBT consequences of a company-provided sedan, along with parking and accommodation benefits. The report references key legislation, including Section 6 of the Miscellaneous Taxation Rulings and Fringe Benefit Tax Assessment Act 1986, and relevant case law such as Lunney and Hayley v FCT and Newsom v Robertson. The analysis determines the business versus private use of the car, car parking benefits, and other benefits like accommodation, determining whether the car usage is considered for business purpose. The report delves into allowable deductions under the Income Tax Assessment Act 1997, and concludes that the fringe benefit expenditures are considered for tax purposes under the FBT Act 1986. It also addresses the deductibility of various expenses for both Charlie and Shine Homes, highlighting the tax liabilities and deductions available.

Running head: TAXATION
Taxation
Name of Student:
Name of University:
Author’s Note:

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Table of Contents
Issue:................................................................................................................................................2
Laws:................................................................................................................................................2
Application:.....................................................................................................................................2
Conclusion:......................................................................................................................................7
Reference List:.................................................................................................................................8

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Issue:
The given case study shows that Charlie worked as the agent of the real estate for Shine
Homes Private Limited. He was given a sedan. The issue at present is dependent on the
determination of the fringe benefit consequences of Charlie and Shine Homes. Based on the
Section 6 of the Miscellaneous Taxation Rulings and Fringe Benefit Tax Assessment Act 1986
there are some cases in which the tax on fringe benefits is levied on the cars (Barkoczy, 2016).
Laws:
a. Section 6 of the Miscellaneous Taxation Rulings
b. Fringe Benefit Tax Assessment Act 1986
c. taxation rulings of MT 2027
d. sub-section 136 (1) of the Miscellaneous Taxation Rulings of 2027
e. section 51 of the Income Tax Assessment Act 1997
f. Lunney and Hayley v FCT (1958)
g. Newsom v Robertson (1952) 2 All ER 728; (1952)
h. Simon in Taylor v Provan (1975) AC 194
i. Tubemakers of Australia Ltd v. FC of T 93
Application:
The paragraph 3 of the Miscellaneous Taxation Ruling states that details of any type of
the business utilities of cars need to be incorporated in the log book or any sort of file due to the
business kilometres which have been travelled using the operating cost method. Any kind of
utility made by the employees which is not entirely connected to the course of producing taxable

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income by that employee can be considered as personal use according to the taxation rulings of
MT 2027 with reference to sub-section 136 (1). The given case study clearly shows that the car
was used by Charlie for functions related to work for 50 kilometres distance. In order to
determine the fringe benefits of the cars which were used by Charlie, the operational cost
valuation will be used in agreement with the sub-section 136 (1) of the Miscellaneous Taxation
Rulings of 2027.
The significant question is whether the car was utilised by the employee or the associate
wanted to exclusively attain the assessable income of the employee. Based on the rules, the
private as well as the business uses of the cars need to be determined. Depending on the sub
section 136 (1) it can clearly be stated that the use of the car by the employee which was
provided by his employer and used during the course of employment for the employment activity
purpose might be considered as the business use of the car for the Fringe benefit Tax. Hence the
levying of the tax is applicable (Woellner et al., 2016).
That Charlie has used the car is representative of the business use in relation to the
generation of the income of the employee which is taxable and is bound to result in Fringe
Benefit Tax. It is clearly seen from the case study that, the car was used by Charlie during his
tenure as an employee of Homes Pty Ltd and this was due to business purposes (Saad, 2014).
In ascertaining whether the car expenses can be allowable to be deducted under the
section 51 of the Income Tax Assessment Act 1997, certain facts have been obtained from the
case study that can be regarded as the allowable deductions for the purpose of the Income tax.

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Based on the Lunney and Hayley v FCT (1958) the discussed points of view in the case
positively confirmed the situations regarding the travel between a person’s residence and his
regular place of employment will be considered as private form of travel. Under the Sub-division
F of Division 3stated in Miscellaneous Taxation Rulings of 2027 which is related with the
income tax, the incurred expenses can be considered as allowable deductions which comply with
the scenario of the Charlie and Homes case study. Travelling to work is viewed as well as a pre-
requisite in the production of the assessable income and is not undertaken during the time when
the income is actually earned (Christie, 2015).
Thus it can be said that the number of kilometres which Charlie actually travelled, would
be considered as strictly private and the outcomes would in no way be altered by the use of the
car by Charlie. The cost that would be incurred by the Barrister in travelling between the place of
his residence to the place in which he worked would be regarded as an expense based on the
Newsom v Robertson (1952) 2 All ER 728; (1952).

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The travel Charlie engaged in would be considered as travel for the purpose of
employment because travel consisted the major part of his employment and this was with
reference to Simon in Taylor v Provan (1975) AC 194. The travel from home by a particular
employee can be considered as a business travel solely under the situations that the type of the
office or the nature of employment is inherently of a nomadic nature. The utility of car by
Charlie was partially for private use and partially for the purpose of employment. In addition to
this, the employment duties of Charlie, required him to discharge his required duties of
employment in places of work which were more than one in number (Barkoczy, 2016). It is
possible for Charlie to claim FBT deductions related to work and related to the cost of petrol as
well as repairs, because it was utilized in gaining the assessable income according to the FBT
Act 1986 (Kabinga, 2015).

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There is the possibility of a car parking Fringe Benefit arising in case the employer
provides the employee with the car parking facility and the listed criteria below are met:
a. The car has been parked for more than four hours
b. The employee controls or hires the car
c. The car is provided for the discharge of the employment duties
d. There is the existence of a commercial parking space which charges fees for the car that
is parked for the whole day within a one kilometre range.
e. The employee utilizes the car for travelling purposes from work to home or from home to
work for least once in a day.
From the case study it is observed that Charlie parked the car in his self controlled
garage. He basically parked the car in a secure place for which the employer paid him $200
every week. The car was used by Charlie for the purpose of travelling between the place of
his employment and his home every day. Thus this results in the fringe benefits for Charlie
and Homes can also claim the deductions for the parking fees on behalf of the employee on
the other hand (Miller & Oats, 2016).
Based on the Fringe Benefit Tax Act 1986, resulting in the tax liability it can be clearly
said from the case study that the Shine Homes Pty Ltd provided Charlie with the honeymoon
accommodation as it was falling within the said act. It is quite evident that the Shine Homes
paid the cost of the accommodations which they claim as the allowable deductions. Charlie
however, shall be under the obligation of declaring the nature of these types of allowance in
the income tax return.

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The liability concerned with the Fringe Benefit Tax for the Shine Homes comes under the
legislation of the Commonwealth. In order to claim benefit for the taxpayers who are actually
employees the Subsection 51 (1) of the Income Tax Assessment Act 1936 is applied. Based on
Tubemakers of Australia Ltd v. FC of T 93 the FBT includes that particular sum which occurs
in the ordinary case that reflects the amount of value which is allocated to the several FBTs. This
are given by the Shine Homes to the employee Charlie. According to the case study, the Shines
homes had incurred numerous FBT expenditures in the form of car hire cost, parking fees,
honeymoon accommodation and so on. The expenses incurred by the Shine Homes in gaining
the assessable income would be regarded as deductable expenditure based on the subsection 51
(1) of the ITAA 1997.
Conclusion:
Conclusively it can be stated that the fringe benefit expenditures will be considered for
tax purposes under the FBT Act 1986. The particular study considers the different aspects of
fringe benefit tax incurred in respect of the Charlie and Homes Pty Ltd. The car used by Charlie
will be regarded as use of business in gaining the income that is taxable which attracts the FBT.

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Reference List:
Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Christie, M. (2015). Principles of Taxation Law 2015.
Kabinga, M. (2015). Established principles of taxation. Tax justice & poverty.
Miller, A., & Oats, L. (2016). Principles of international taxation. Bloomsbury Publishing.
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation Law
2016. OUP Catalogue.