Australian Taxation Law: Krafty Kitchens Case Study Analysis

This assignment solution analyzes Australian taxation law, specifically addressing the tax implications for Krafty Kitchens. It covers income tax deductions, GST credits, and fringe benefits tax (FBT) related to employee benefits, such as golf membership fees. The solution calculates the allowable income tax deduction, the GST credit, and the FBT liability. The assignment references relevant legislation and provides a clear understanding of the tax treatment of employee benefits in Australia. The solution is ideal for students studying taxation law and seeking a comprehensive understanding of these concepts. The assignment also includes references to relevant legislation and government websites. The solution provides a detailed breakdown of the calculations and provides insights into the tax implications for Krafty Kitchens. This assignment helps students understand the practical application of tax laws in a business setting.

Running head: AUSTRALIAN TAXATION LAW
Australian Taxation Law
Name of the Student:
Name of the University:
Authors Note:

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AUSTRALIAN TAXATION LAW
Contents
Part a:...............................................................................................................................................2
Part b:...............................................................................................................................................2
Part c:...............................................................................................................................................3
References:......................................................................................................................................4

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AUSTRALIAN TAXATION LAW
Part a:
As per Income Tax Assessment Act 1997 an employer making payment on behalf of employees
for their recreational entertainment such as gym membership, club membership, golf
membership etc. will be allowed as income tax deduction to the employer. Thus, the net amount
of golf membership fees excluding GST shall be allowed as deduction for income tax purposes
of the employer, i.e. Krafty Kitchens Ltd. in this case.
As per s 4-15 of ITAA 1997 for computation taxable income Krafty Kitchens can claim a
deduction of (220 x 100/110) = $200 from the revenue of the company.1
Part b:
An employer providing for recreation entertainment such as club membership fees, gym fees,
gold membership fees will be allowed to take credit for GST paid on such fees. The standard rate
of GST in the country is 10%. Thus, krafty Kitchens can claim GST credit on the payment of
$220 as golf membership fees. The amount GST credit on the payment of golf membership fees
is calculated below:
GST credit will be (220 x 10/110) =$20.
1 "Income Tax Assessment Act 1997", Legislation.Gov.Au (Webpage, 2019)
<https://www.legislation.gov.au/Details/C2019C00049>.

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AUSTRALIAN TAXATION LAW
Part c:
FBT is payable by employers who are providing certain benefits to the employees or their
families. Payment of golf membership fees on behalf of an employee is a fringe benefit and
accordingly, Krafty Kitchens must pay FBT on the same.2
Calculation of FBT liability:
= (220 x 2.0802) x 47% = $215.09
2 "FBT", Ato.Gov.Au (Webpage, 2019) <https://www.ato.gov.au/rates/fbt/?
page=3#Type_1__higher_gross_up_rate>.

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AUSTRALIAN TAXATION LAW
References:
"FBT", Ato.Gov.Au (Webpage, 2019) <https://www.ato.gov.au/rates/fbt/?
page=3#Type_1__higher_gross_up_rate>
"Income Tax Assessment Act 1997", Legislation.Gov.Au (Webpage, 2019)
<https://www.legislation.gov.au/Details/C2019C00049>