Comprehensive Taxation and Fringe Benefits Tax Analysis Assignment

This assignment provides a detailed analysis of taxation principles, focusing on fringe benefits tax (FBT) and its application in various scenarios. The solution examines the tax implications of business versus private use of company assets, detailing the calculation of taxable benefits and FBT liabilities. It addresses the assessable income of employees, specifically considering the application of relevant taxation rulings and legislation. The assignment also explores a case study involving the barter system, analyzing its implications under Australian taxation guidelines, including GST and income tax. Furthermore, the document delves into the treatment of medical services under GST and the criteria for distinguishing between business activities and hobbies for tax purposes. The analysis includes stepwise calculations, references to relevant tax acts and rulings, and case law to support the conclusions, providing a comprehensive understanding of the taxation concepts discussed.

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

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Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................6
Answer to Part A........................................................................................................................6
Answer to Part B........................................................................................................................6
Answer to Part C........................................................................................................................7
Answer to Part D........................................................................................................................7
References..................................................................................................................................9

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Answer to Question 1
The taxation rulings in conformity with “taxation rulings of MT 2027”, infers that
the private use under “sub-section 136 (1)” is not applicable for assessable income of an
employee. The “sub-section 136 (1)”, defines that the operating cost and the valuation
method for business journey is brought into effect only in case of use other than private. As
per para 3 the “Miscellaneous Taxation Ruling” details concerning the business journey is
necessary for maintaining the logbook or identical document in case the business kilometres
travelled by the car is determined with the applying operating cost method. The case study
has been able to infer that Charlie travelled 50,000 km which is associated to work. The
determination of FBT should be in agreement with “sub-section 136 (1) of the
Miscellaneous Taxation Rulings of 2027” (Wilson-Rogers and Pinto 2015).
The important question is considered with the assessment of the business use and
private use of the car. This is considered with the use of employee producing or gaining of
the assessable income pertaining to business activities which is in accordance with “sub
section 136 (1)”. It needs to be further discerned that the employer providing the car has
used it for business purpose which may be further constituted with FBT (Deutsch 2014).
The test shows that the FBT is identical to the income taxation laws in ascertaining
whether the expenditures incurred in operating the car is deductible as per “section 51 of the
Income Tax Assessment Act 1997”. The significant evidences of the study suggest that the
expenditures incurred by Charlie on car is considered for the employment use and deductions
made as per “section 51 of the Income Tax Assessment Act 1997”. This illustrates that the
expenditures incurred by Charlie on the vehicle needs to be considered for income tax
deductions. The difference in the private and business use of FBT needs to be used for

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knowing whether the expenditures on the use of car is assessable for IT deductions (King and
Case 2015).
Stepwise Calculation
 Petrol and oil per month - $2,000, Log book maintained for 12 weeks or 3 months.
Petrol and oil cost - $2,000 x 3 = $ 6000
 Repairs and maintenance per month - $3,500, Log book maintained for 12 weeks or 3
months. Repairs and maintenance cost = $ 3500 x 3 = 10500
 Car Parking fees per week $ 200, Log book maintained for 12 weeks, Car Parking
fees =200 x 12 = $2400
 Gross Taxable value = 30% of (6000+ 10500+240+960+2400)
 Taxable value of benefits = $ 6030
As per the present case study of “Charlie and Homes”, the guidelines from the
“Miscellaneous Taxation Rulings of 2027” is recognized with the principals of IT. The
expenses incurred by “Charlie and Homes” rulings are corresponding to the compliance of
the requirement as per the “Sub-division F of Division 3” of the IT assessment act (Lehmann
Simula and Trannoy, A., 2014).

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The “taxation rulings of IT 112” is based on the decision taken with the case
“Lunney and Hayley v FCT (1958)” and the same is confirmed with the situation of
travelling from home and person’s regular place of employment and whether this is to be
considered as an ordinary private travel. The travel to the place of work is taken into account
as pre-requisite in generating the income. The office or employment is considered to be
itinerant in nature. The reference for this is taken from “Newsom v Robertson (1952) 2 All
ER 728; (1952)”. This cost aspect is incurred with the barrister in travelling from home to
place of work. The court has acknowledged that these travelling expenditures are based on
travelling from home to chamber (Burkhauser, Hahn and Wilkins 2015).
Stepwise Calculation
 Total Kilometres Travelled 80000
 Distance travelled for Business use = 70% of 80000= 56000, Distance travelled for
private use 30% of 80000 = 24000

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 Percentage of business use = Distance travelled for Business use/ Total Kilometres
Travelled= (56000/80000) x 100 = 70%
 Petrol and oil per month - $2,000, Log book maintained for 12 weeks or 3 months.
Petrol and oil cost - $2,000 x 3 = $ 6000
 Repairs and maintenance per month - $3,500, Log book maintained for 12 weeks or 3
months. Repairs and maintenance cost = $ 3500 x 3 = 10500
 Car Parking fees per week $ 200, Log book maintained for 12 weeks, Car Parking
fees =200 x 12 = $2400
 Total Expenses = 6000+ 10500+240+960+2400 = $ 20100
 Taxable value of the FBT = Total Expenses * Percentage of Business Use. Final
Taxable value of the FBT = 20100*70% = $ 14070
The employment duties itinerant in nature for a long time is seen to be acknowledged
with the employee travelling on the circumstance of business travel. With reference to the
case “Simon in Taylor v Provan (1975) AC 194”, the travel of Charlie is regarded as an
employment travel which forms a fundamental part of the work (Lal et al. 2017).
As per the “FBT ACT 1986”, Charlie used the vehicle partly for private purpose and
partly for work. The cost on the “petrol, repairs and maintenance, insurance and registration”
is taken into account with the FBT deductions and the work-related claims as a portion of the
repairs and petrol expenses (Hodgson and Pearce 2015).
Charlie’s car was parked at a secured location for which the employer paid $ 200
every week. It is seen that car was parked in the garage of Charlie and under the control of
the provider. Charlie is liable to claim the deductions based on the fees paid on behalf of his
employees. The taxation ruling for “TR 94/25” is applicable to the employers and held liable
as per the imposition “section 5 of the Fringe Benefit Tax Act 1986”. This states that

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“subsection 51 (1) of the Income Tax Assessment Act 1936”, is applicable for the FBT and
the taxpayers who are employers (Braverman, Marsden and Sadiq 2015).
Answer to Question 2
Answer to Part A
Based on the given case Allan and Betty decided for a tree change and sold their
Melbourne property which was purchased on a 10-hectare block in central Victoria. In
addition to this, Betty works part-time as an accountant and Allan as a locum doctor. The
main interpretation discerns that Allan and Betty treated the local wine makers for snake bite
when the vet was not available and provided with dozen bottles of Lonarch Brae shiraz with a
retail value of $ 360. Allan has been able to receive the fees for his medical services. As per
GST and health under ATO the medical services are considered as GST free. Henceforth,
these services are not to be considered for tax assessment.
Answer to Part B
As per the tax return instruction 2013 under ATO, the significant consideration to
determine the hobby from business is seen with non-consideration of assessable income. The
business indicators from the various courts and tribunals has been considered with actual
starting of the business, commercial purpose or character of the business, profit prospect,
characteristic of the industry, consideration for repetition, regularity and continuity.
As per the given situation Allan is depicted to sell the surplus produce on a regular
basis to the local farming and three other retailers. Based on the Australian Taxation rulings
even though the activities are considered to be as hobby, the supplies of the goods and
services require requesting the ABN. Allan and Betty need to maintain “Statement by a
supplier” form. This will permit the retailers to pay any tax which is withheld from payment
(Yong and Ma 2015).

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A hobby does not call for the need of retailers. In this case the surplus of the local
supermarket is seen to regularly supply the different type of components such as pumpkin
and sweet potato.
Answer to Part C
In general, there is not single factor to determine the whether an individual is in a
business. The decision to initiate the business needs to be considered as per the registered
business name and obtaining ABN. However, the determination of hobby does not need to
consider additional tax or reporting obligations. In case the activities are treated as hobby the
suppliers needs to request for ABN.
As per the second case, it needs to be discerned that the barter system of pay is taken
into consideration with the need of paying “up-front, one-off fee” of $50 to Betty and Allan.
This needs to be maintained for the maintenance of the administrative records. This also
relates to the fact that the business needs to be held for the tax assessment. In this case, Allan
and Betty were not seen to be having ABN so “Statement of Supplier” form is mandatory in
nature (Yong and Ma 2015).
Answer to Part D
Barter system involves direct exchange needs direct exchange of the goods and
services which are seen to be considered as per the exchange of goods and services without
reference from money value. As per the Australian taxation guidelines the barter system of
the exchange is seen to be depicted with the various factors which includes deductible and
assessable form of the income which are deductible as per the credit or cash transactions.
Based on the Australian taxation guidelines it has been determined that the various
factors of the barter system are based on assessable and deductible aspects of the IT to the

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same extent as “credit transactions or cash”. In this situation the tax needs to be payed either
in cash or kind (Deutsch 2014).

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References
Braverman, D., Marsden, S. and Sadiq, K., 2015. Assessing Taxpayer Response to
Legislative Changes: A Case Study of In-House Fringe Benefits Rules. J. Austl. Tax'n, 17,
p.1.
Burkhauser, R.V., Hahn, M.H. and Wilkins, R., 2015. Measuring top incomes using tax
record data: A cautionary tale from Australia. The Journal of Economic Inequality, 13(2),
pp.181-205.
Deutsch, R.L., 2014. Australian Tax Handbook 2006.
Hodgson, H. and Pearce, P., 2015. TravelSmart or travel tax breaks: is the fringe benefits tax
a barrier to active commuting in Australia? 1. eJournal of Tax Research, 13(3), p.819.
King, D. and Case, C., 2015. AN INTERNATIONAL INDIVIDUAL INCOME TAX
COMPARSION: THE UNITED STATES, AUSTRALIA, AND UNITED
KINGDOM. Business Studies Journal, 7(2).
Lal, A., Mantilla-Herrera, A.M., Veerman, L., Backholer, K., Sacks, G., Moodie, M.,
Siahpush, M., Carter, R. and Peeters, A., 2017. Mod
Lehmann, E., Simula, L. and Trannoy, A., 2014. Tax me if you can! Optimal nonlinear
income tax between competing governments. The Quarterly Journal of Economics, 129(4),
pp.1995-2030.
Wilson-Rogers, N. and Pinto, D., 2015. A mandatory information disclosure regime to
strengthen Australia’s anti-avoidance income tax rules. Australian Tax Review, 24, pp.24-47.
Yong, S.E. and Ma, M., 2015. A comparative study of the Goods and Services Tax (GST)
implications on real property transactions in Australia and New Zealand.