TABL2751 Tutorial 12 Homework PDF

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Problem Questions Problem 1 a) Telephone bill  type benefit Div.5 EXPENSE FB s20.  $700 ($1000 x 70%)  expense payment benefit(s20 of the FBTAA 1986)  valuation: o value of the expense payment benefit o the amount paid o less any employee contribution, o less any “otherwise deductible amount ”(s23 and 24 of the FBTAA 1986)  FB $1000 telephone (GST Inc)  L30% (deductible)L reduce to 0 s23/24  L70% (type 1 taxable)  Pro-rated:  30% deductible as if employee incurred it himself  70% subject to FBT Professional journal  exempt s58y  $0  FB $200 subscription GST (Included)  s58y exempts professional journal subscriptions  ‘eligible’ Relocation expense  exempt s58y  $0  don’t know exactly what is included in the relocation expenses  Div.13L miscellaneous exempt benefits  s58B  removal and storage of effects ‘stuff’  s58F  relocation transport  FB $4000 Relocation  s58 Taxable value $4000 (Type1) Private insurance  expense FB s20.  $1,200  this is a type 2 fringe benefit  FB $1200 private health (GST Free)  Div.5 expense payment  S23N  amount paid or reimbursed by employer  S20B  S24  not apply  Not deductible  Taxable value $1200  (Type2 ) Gym  expense benefit s20.  $900  this is type 1 fringe benefit as GST is payable.  Cannot apply otherwise deductible rule

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IT DOES NOT FALL UNDER AN EXEMPT FRINGE BENEFIT(MEMBERSHIP FEES) as it does not meet the definition of an eligible membership or subscription

Gym  exempt s58y  $0  no employee contribution and no amount is deductible  Not ‘eligible’ membership  Not related to work  No exemption  Taxable value $900 Type 1 Membership  no exemption s58y  Div. 5 expense payment  S24  otherwise deductible rule and reduces it to $0 b) For employer: Type 1: ($900 + $700) x 2.0802 = $3,328.32 Type 2: ($1,200) x 1.8868 = $2,264 FBT payable: ($11,649 + $2,264) x 0.47 =$2,628 Employer:  Deduction FBT  Benefit-cost deduction  Input tax credit  Don’t give to low paying employees  47% as highest marginal tax rate Problem 2 a) Public rate = 6% p.a. Employee rate = 5% p.a.  FB – s136(1) – in respect of employment  Not exempt under Div.5 Div.4  s16.  Occurs when an employer makes a loan to an employee. o It is taken to have been provided in respect of each year of tax during the whole or part of which the recipient is under an obligation to repay the whole or part of the loan.  s 18(1): the taxable value is the amount (if any) by which the notional amount of interest in relation to the loan in respect of the year of tax exceeds the amount of interest that has accrued on the loan in respect of the year of tax.  Notional interest: $500,000 x 5.25% = $26,250  Actual interest: $500,000 x 5% = $25,000  Taxable value of loan = $26,250 - $25,000 = $1,250

For employer:  Financial supply Type 2: ($1,250) x 1.8868 = $2,358.5 FBT payable: ($2,358.5) x 0.47 = $1,108.5 b) Otherwise deductible rule (s 19)  The taxable value of a loan fringe benefit may be reduced in accordance with the 'otherwise deductible' rule.  Broadly, this means that the taxable value may be reduced to the extent to which interest payable on the loan is, or would be, allowable as an income tax deduction to the employee  Non-deductible use of loan is 100%.  Therefore the taxable value = $0 as $1,250 x 100%.  Reduced to $0 Problem 3 a) $150,000 x 9.5% compulsory paid by employee = $14,250 $5,000 salary sacrifice ($14,250 + $5,000 = $19,250) Concessional contribution < $25,000 (cap) = 15% x $19,250 = $2,887 Taxed at 15% in the fund  s290-60 b)  Don’t have to pay FBT on the $5,000  S136(1) Fringe benefit excludes super

General Discussion Questions 1) Why is fringe benefits tax imposed on the employer rather than the employee? Fringe Benefits Tax (FBT) is a tax payable by employers for benefits paid to an employee (or an employee's associate e.g. a family member) in place of salary or wages. To secure the best workers for your business, you often have to entice them with non-income related benefits. For example, an employee may receive fringe benefits in the form of:  a car  car parking  low interest loans  payment of private expenses.

It's entirely legal and a common form of reimbursement used by businesses for their employees. 2) The taxable value of fringe benefits provided by ABC Ltd to its employees for the FBT year ended 31 March 2018 is: b. Type 1 fringe benefits: $8,000 c. Type 2 fringe benefits: $5,000 Calculate the fringe benefits tax payable for the year. ABC Ltd for FBT year ended 31 March 2018 Type 1 FBT: $8,000 x 2.0802 = $16,641.6 Type 2 FBT: $5,000 x 1.8868 - $9,434 FBT payable: ($16,641.6 + $9,434) x 47% = $12,255.53 3) What requirements need to be met in order for a person to be able to claim a deduction for personal superannuation contributions? What tax rate applies to these contributions? This includes people who get their income from:  salary and wages  a personal business (for example, people who are self-employed contractors, or freelancers)  investments (including interest, dividends, rent and capital gains)  government pensions or allowances  super  partnership or trust distributions  a foreign source. The contributions that you claim as a deduction will count towards your concessional contributions cap. When deciding whether to claim a deduction for super contributions, you should consider the super impacts that may arise from this, including whether:  you will exceed your contribution caps  Division 293 tax applies to you  you wish to split your contributions with your spouse  it will affect your super co-contribution eligibility. If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions cap....