Assessment of Fringe Benefit Tax for Taxation Module, University Name

This report examines the fringe benefit tax (FBT) implications for Shine Homes Pty Ltd and its employee, Charlie, a real estate agent. The analysis focuses on the FBT consequences arising from Charlie's use of a company-provided sedan, including the application of operational cost valuation methods and the determination of private versus business use of the car. 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 (1958) and Newsom v Robertson (1952). Furthermore, the report addresses the tax implications of Charlie's honeymoon accommodation provided by Shine Homes and the car parking benefits. The conclusion summarizes the tax liabilities and deductible expenditure for both Charlie and Shine Homes under the FBT Act 1986 and relevant sections of the Income Tax Assessment Act 1997, emphasizing that the use of the car by Charlie for generating taxable income attracts FBT. The report provides a detailed analysis of the various fringe benefits, their tax implications, and how the expenses were incurred by Shine Homes to gain assessable income and will be regarded as deductible expenditure.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Issue:..........................................................................................................................................2
Laws:..........................................................................................................................................2
Application:................................................................................................................................2
Conclusion:................................................................................................................................6
Reference List:...........................................................................................................................7

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Issue:
The present issue is based on the determination of the fringe benefit consequences of
Shine Homes and Charlie. From the case study, it is found that Charlie worked as the real
estate agent for Shine Homes Ptd Ltd and was provided with a sedan. As defined under
Section 6 of the Miscellaneous Taxation Rulings and Fringe Benefit Tax Assessment Act
1986 there are situations under which fringe benefit tax is levied on car (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 taxation rulings of MT 2027 with reference to sub-section 136 (1) states that any
form of use made by employee that is not entirely related to the course of producing taxable
income by an employee shall be regarded as personal use. According to the paragraph 3 of
the Miscellaneous Taxation Ruling details regarding business use of car must be
incorporated in the log book or any similar file for the business kilometres travelled in
applying the operating cost method (Christie, 2015). As evident from the case study, Charlie
used the car for 50 kilometres related to work purpose. In agreement with the sub-section

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136 (1) of the Miscellaneous Taxation Rulings of 2027 to determine the fringe benefit of car
that was used by Charlie operational cost valuation method will applied.
As a rule, it is necessary to determine the private and business use of the car. Hence,
whether the car used by employee or the associate was exclusively for gaining assessable
income of the employee forms an important question (Kabinga, 2015). With reference to sub
section 136 (1) it follows that the use of car made by employee in the course of employment
provided by the employer to employee for the purpose of carrying of an employment activity
may be regarded as the business use of the car for Fringe Benefit Tax.
As observed from the case study Charlie used the car in the course of his employment
with Homes Pty Ltd and gave him the car for carrying the business activity. The use of car by
Charlie represents business use in generating taxable income of the employee and this result
in Fringe Benefit Tax.
In determining whether the expenses incurred in using the car shall be allowable as
deductions under section 51 of the Income Tax Assessment Act 1997, there are certain facts
obtained from the case study that can be regarded as allowable deductions for income tax
purpose (Miller & Oats, 2016).

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In agreement with the scenario of Charlie and Homes, the expenditure incurred by
them can be considered as allowable deductions under Sub-division F of Division 3 stated in
Miscellaneous Taxation Rulings of 2027 associated to Income Tax. As held in the case of
Lunney and Hayley v FCT (1958) the viewpoint stated in the case affirmed the situations
that travel between home and a person’s regular place of employment will be viewed as
private travel. Travel to work is viewed as pre-requisite in producing the assessable income
and it is not undertaken at the time of earning that income (Pope et al., 2016). Hence, the
kilometres travelled by Charlie to workplace would be viewed as private and the use of car by
Charlie would not alter the outcomes. As held in Newsom v Robertson (1952) 2 All ER 728;
(1952), the cost occurred by the barrister in traveling between his place of residence to the
place of work would be regarded as an expense.
It has been recognised that travel from home by an employee may be regarded as
business travel only under situations that the nature of the office or place of employment is
inherently itinerant. With reference to Simon in Taylor v Provan (1975) AC 194 travel by

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Charlie would be viewed as travel for employment purpose because travel was the
fundamental part of his employment (Woellner et al., 2016). Additionally, the employment
terms of Charlie necessitated him to discharge his duties of employment in more than one
place of work. The use of car by Charlie was partly for employment purpose of and partially
for private use. As per the FBT Act 1986, for the purpose of FBT Charlie can claim FBT
deductions associated with work associated to the cost of petrol and repairs because it was
used in gaining the assessable income.
A car parking Fringe Benefit might arise if the employer provides the car parking to the
employee and below listed criteria are met;
a. The car is parked beyond four hours
b. The car is hired or controlled by the employee
c. The car is given to discharge the employment duties
d. There is a commercial parking place that charges fee for the car parked for entire day
inside the range of one kilometre
e. The car is used by employee use by employee for travelling purpose from work to
home or home to work for at least once in a day (Saad, 2014).
From the case, study it is observed that Charlie has parks the car at a secure place for
which he is paid $200 every week by the employer. Furthermore, Charlie parked the car in
his garage, which was controlled by him. Charlie used the car for travelling between his place
of employment and home every day. Hence, this results in fringe benefit for Charlie and on
the other hand, Homes can claim deductions for the parking fees that is paid on behalf of the
employee.
From the case study, it is evident that Shine Homes Pty Ltd provided Charlie with the
honeymoon accommodation and the present situation falls within the Fringe Benefit Tax Act

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1986, which results in tax liability. As evident Shine Homes paid the cost of accommodations
for Charlie and Shine Homes and claim as allowable deductions. However, Charlie shall be
under obligation of declaring such types of allowance in his income tax return.
Subsection 51 (1) of the Income Tax Assessment Act 1936 is applied to claim fringe
benefit for the taxpayers that are employers (Snape & Souza, 2016). The liability concerning
the Fringe Benefit Tax for Shine Homes arises under the legislation of Commonwealth. With
reference to Tubemakers of Australia Ltd v. FC of T 93 FBT includes the sum that is
occurred in ordinary case reflecting the amount of value which is allocated to the several FBT
given by Shine Homes to his employee Charlie. From the case study it is observed that Shine
Homes incurred numerous FBT expenditure in the form of honeymoon accommodation, car
hire cost, parking fees. With reference to subsection 51 (1) of the ITAA 1997 these expenses
were incurred by Shine Homes in gaining the assessable income and will be regarded as
deductible expenditure.
Conclusion:
On arriving at the conclusion, it is can be stated that the fringe benefit expenditure are
considered for the purpose of tax under the FBT Act 1986. The study considers the various
aspects of fringe benefit tax incurred in respect of Charlie and Homes Pty Ltd. The use of car
by Charlie will be regarded as business use in gaining the taxable income and this attracts
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.
Pope, T. R., Rupert, T. J., & Anderson, K. E. (2016). Pearson's Federal Taxation 2017
Individuals. Pearson.
Saad, N. (2014). Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.
Snape, J., & De Souza, J. (2016). Environmental taxation law: policy, contexts and practice.
Routledge.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian Taxation
Law 2016. OUP Catalogue.