1、FRINGE BENEFITS TAXReasons For Separate Legislative ProvisionsSupplements narrow concept of ordinary eRecall Tennant v Smith Statutory eOriginal Fringe Benefits TaxSection 26(e) now 15-2Problems associated with this sectionTracking benefitsValuing benefitsFRINGE BENEFITS ACTReason for Introduction e

2、 problems Associated with 15-2Basic FeaturesTaxes EmployerValues BenefitsTax Rate of 47% (2014/15)FBT year 1 April 30 MarchFoundations of Taxation Law CCH Australia LimitedTypes of fringe benefit Car Debt waiver LoanExpense paymentHousingLiving-away-from-home allowanceAirline transportBoardMeal ente

3、rtainmentTax exempt body entertainmentCar parkingPropertyResidualFoundations of Taxation Law CCH Australia LimitedFRINGE BENEFIT“Fringe benefit” defined in s 136(1) FBTAA. Arises where:A benefit is provided during a year of taxBy an employer, an associate of the employer, or a third party under an a

4、rrangement with the employer or associate of the employerTo an employee or an associate of the employeeIn respect of the employment of the employeeProvision of Fringe BenefitEmployer Employee Or Or Associate Provides benefit Associate to Or Or Arranger Third PartyVALUATION OF BENEFITSMOTOR VEHICLEIs

5、 there a Fringe Benefit?What vehicles are covered by FBT legislation? (section 136)When does a benefit arise (section 7)Valuation MethodsStatutory FormulaCost BasisCar Benefit - StatutoryCALCULATIONStatutory allowanceBase Value = $20,000Private Use = 365 daysFBT YearEmployee Contribution nil .2 x 20

6、,000 x 365 365 Fringe Benefit value = $4,000Car Benefit Cost BasisOperating CostsPetrol, Repairs, maintenance, tyresRegistration and InsuranceDepreciation (where vehicle owned by provider)Lease Charges (where vehicle leased by provider)Business PercentageEstimated by keeping a log book for 12 weeks

7、showing business travel. Odometer reading is required for commencement and end of period.LoanLoan Amount = $60,000Date 1 April 2013Interest Rate charged 3%Statutory Rate 5.95% (2014/15 year) $60,000 x 5.95% $60,000 x 3% $3,570 - $1,800 Fringe Benefit value = $1,770Other BenefitsExpense PaymentDistin

8、guish from allowance Roads Traffic Authority of New South Wales v FCT (1993) 26 ATR 76 Valuing in-house or external?In-house property or in-house residual?Value of external = value of expense paid.Value of in-house property see belowValue of in-house residual = see s. 48 and 49PropertyDistinguish be

9、tween in-house and otherValuing differs between in-house & other.Sections 42 & 43Otherwise Deductible RuleReduces the taxable value of a benefitThe reduction is by the amount the employee could have deducted if that employee incurred the expense the taxable value of the loan benefit of $2,130 would

10、be reduced to zero if the loan was used to produce assessable e by the employee, such as the purchase of a rental propertyCALCULATING FBTDetermine Type 1 Aggregate FBT Amount (GST charged on acquisition of benefit)Gross UpCalculate Tax ORCalculating FBTDetermine Type 2 Aggregate Fringe Benefit Amoun

11、t (No GST on acquisition of benefit)Gross UpCalculate taxGROSS UPReason for Gross UpEnsure no benefit in taking a fringe benefitGROSS UPAssume 50% tax rateAssume $10,000 fringe benefitIf $10,000 taken as value, salary sacrifice = $15,000 ($10,000 + $5,000 tax)How much would employee need to earn (if

12、 they paid tax on amount) to be left with $10,000 cash?Answer is $20,000 (i.e. 20,000 less 50% = 10,000)Gross up rules ensure salary sacrifice is $20,000 NOT $15,000. Thus no tax advantage in taking a fringe benefitFBT PAYABLEBenefit on Motor VehicleValue = $4,000.No GST$4,000 x 1.8868 = $7,547 x 47%Tax = $3,547GST on Vehicle$4,000 x 2.0802 = $8,321 x 47%Tax = $3,911CONSEQUENCES Consequences of Providing FBTFor EmployerCost of benefit and FBT tax deductibleSpecial rules for non profit organizationsSection 65J rebateFor EmployeeSalary SacrificeEXEMPTIONS AND IMP