Principles of Taxation Law
Answers to Questions
CHAPTER 7 – FRINGE BENEFITS TAX
Determine whether the following benefits are fringe benefits or exempt fringe benefits and, where applicable, the relevant category of fringe benefit. Provide reasons for your answer:
Payment to employee for the estimated cost of the employee’s home phone bill as the employee sometimes has to use the home phone for work purposes.
Provision of accommodation at the family home to a child who is over 21 and works in the family business.
Payment of employee’s superannuation contribution by the employer to a complying superannuation fund.
Loan by Company X to one of its directors, Rupert, who is …show more content…
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Advise ABC of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2013. Assume that ABC would be entitled to input tax credits in relation to any GST-inclusive acquisitions. (b)
How would your answer to (a) differ if clients of ABC also attended the end-of-year dinner? Answer
(a) FBT consequences for ABC:
Salary $300,000 o Not a fringe benefit as specifically excluded from the definition of “fringe benefit” in s 136(1) of FBTAA; therefore no FBT consequences for ABC: see [7.80].
$220 per month for phone bill o The first issue to consider is whether this is an allowance or a reimbursement.
Although the fixed nature of the amount would indicate an allowance, it is in fact a reimbursement as the $220 represents the exact expense incurred by Alan and is not an arbitrary amount: see RTA Case and TR 92/15. o Therefore this is an expense payment fringe benefit: FBTAA, s 20. o Taxable value = $220 x 12 = $2,640 (s 23 FBTAA – external expense payment fringe benefit). o Alan uses the phone for work-related purposes only; therefore, if ABC provides a
“no-private-use declaration”, the