HI6028 Taxation Question 1 Solution

Question 1                                                              

Perisher Pty Ltd (Perisher) is a Ski equipment manufacturer that operates around Mt Hotham in Victoria.  On 1

May 2019, Perisher provided Nikita (one of its employees) with a car as Nikita does a lot of travelling for work purposes. However, Nikita’s usage of the car is not restricted to work only. Perisher purchased the car on that date for $44,000 (including GST) plus $2,000 (including GST) dealer delivery charges.

For  the  period  of  1  May  2019  to  31  March  2020,  Nikita  travelled  12,000  kilometers  in  the  car  and  incurred expenses of $770 on minor repairs that have  been reimbursed by Perisher. The car was not used for 10 days when Nikita was interstate and was parked at the airport and for another five days when the car was scheduled for annual repairs.

Calculate  the  Fringe  Benefits  Tax  Liability  for  Perisher,  please  have  a  look  at  the  matrix  below  on  how  to answer the question

QUESTION 1: Calculate the FBT liability for Perisher Pty Ltd                                                                                                 Weighting

Identification of material facts (issues) regarding fringe benefits provided to Nikita                                          1 %

Identification and analysis of legal issues / legal question and relevant taxation law  in regards to           1 %

fringe benefits (e.g. FBTAA 1986).

Thorough  application  of  tax  law  (e.g.  ITAA  1936  and  ITAA  1997)  to  material  facts  in  Perisher’s           1 %

case.

Accurate conclusion of the FBT calculation.                                                                                                                   5 %

Correct information and taxation law have been used and properly cited. A detailed analysis has           2 %

been performed.

QUESTION 1 TOTAL MARKS:                                                                                                                                              10 %

The taxable value of that fringe benefit, or the aggregate of the taxable values of those fringe benefits, as the case may be, in relation to that year of tax, is the amount calculated in accordance with the formula:

NOTES

1. Base value of the car = Purchase cost + Delivery charges

                                                =$44000+$2000

                                                = $46000

2. No of days during that year of tax on which the car fringe Benefits where provided by the provider = 1^st May 2019 to 31^st March 2020. = 304

3. Rate on the taxable value given for the fringe benefit is = 10% on the taxable value

Formula for calculation of the Taxable value

0.2 * Base value of the car * No of days during that year of tax on which the car fringe                        

Benefits where provided by the provider

                                                                No of days in that year of tax         

=0.2 * $46000 (Note 1) * 304 (note 2)/365 – Expenses incurred by employee

=7662.24 -770

=6892.24

Fringe benefit tax liability = Taxable value    * Rate of tax

= 6892.24 *10%  = 689