Tut wk 8 calculation outline PDF

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Q1 Statutory formula method: A base value

$45,000

B statutory fraction

0.2

C number of private days

365

D number of days in the year

365

E recipient’s contribution

0

Taxable value of car fringe benefit = ((AxBxC)/D)- E = (45,000 x 0.2 x 365)/365 – 0 = $9000 Gross up, ie multiply by 2.0802 (Type 1 fringe benefit) 9000 x 2.0802= 18,721.80 FBT payable = 18,721.80 x 47% = $8799.25

Operating Costs Method C operating costs

($800 + $400) x 12 = $14,400

BP business percentage R recipient’s contribution Taxable value of car fringe benefit =[C x (100%-BP)] – R = 14,400 x 75% - 0

25% 0

= $10,800 Gross up, ie multiply by 2.0802 (Type 1 fringe benefit) 10,800 x 2.0802= 22,466.16 FBT payable = 22,466.16 x 47% = $10,559.10

a) How (if at all) would your answer be different if the car travelled 10,000 km on business, out of the 30,000 km travelled during the year? This question illustrates the effect of an increase in the business use percentage. It only impacts the calculation under the operating costs method (see below) FBT payable under the statutory formula method is the same, so FBT payable is still lower under the statutory formula method.

Operating Costs Method C operating costs

($800 + $400) x 12 = $14,400

BP business percentage R recipient’s contribution

= 10,000/30,000 x 100 = 33.33%

0

Taxable value of car fringe benefit =[C x (100%-BP)] – R = 14,400 x 66.67% - 0 = $9,600.48 Gross up, ie multiply by 2.0802 (Type 1 fringe benefit) 9,600.48 x 2.0802= 19,970.92 FBT payable = 19,970.92 x 47% = $9386.33

b) If John made personal contributions for the car, what impact would this have on the taxable value of the car fringe benefit? Under either method, John’s personal contributions would reduce the taxable value of the car fringe benefit (see formulae), and generally reduce FBT payable.

Question 2 Advise Susie regarding the income tax implications arising in relation to the above facts. No deductions can be claimed for the four weeks Susie used the property herself as a holiday home. Susie can claim the full amount as a deduction for the agent’s commission (800) and costs of advertising for tenants (150). travel expenses re inspection of property are not deductible here under s26-31

Susie can claim deductions for her other expenses based on the proportion of the income year the property was rented out or was genuinely available for rent. Susie’s rental income and deductions for the year are as follows: Rent received $16,000 Rental deductions ((48/52 × $22,871) + $950) =22,061.69 Rental loss ($6,061.69) Susie can claim a rental loss of ($6,061.69) in her tax return. Susie needs to keep records of her expenses. If she later sells the property, the proportion of the expenses that she could not claim a deduction for may be taken into account in working out the capital gain.

Q3 Advise Xinyi regarding the income tax implications arising in relation to the above facts. No deductions can be claimed for the four weeks Xinyi used the property herself. She can claim the agent’s commission $800 and cost of advertising $200 as deductions. She can claim deductions for her other expenses based on the proportion of the income year it was rented out or was genuinely available for rent at the market rate: 45/52 weeks × $20,800 = $18,000. Because the rent Xinyi received from Sarah was less than market rate and her expenses were more than the rent received during that period, she cannot claim all of the expenses. Xinyi can only claim deductions equal to the amount of the rent during this period, that is, $600. (Note: if Sarah had rented the property for the market rate, Xinyi would have been able to claim deductions for the three week period of $1200 (3/52 × $20,800 = $1200)). Xinyi’s rental income and deductions for the year are as follows: Rent received $10,000 Rental deductions ($18,000 + $800 +200 + $600) $19,600 Rental loss ($9,600) Xinyi can claim a rental loss of $9,600 in her tax return. Xinyi needs to keep records of her expenses. If she later sells the property, the proportion of the expenses she could not claim a deduction for are taken into account in working out the capital gain....