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Fringe Benefit Tax

Part 1

 In order to determine the amount of Fringe Benefit Tax that must be paid by Dominic for the year ended 31 March 2019, we will have to arrive at the grossed up taxable value of fringe benefits provided by Dominic. The value of each fringe benefit provided by Mr. Dominic to his employees has been calculated below:

  • Car Fringe Benefits provided to Enzo

As per the FBT rules of ATO, the value of car fringe benefit can be calculated using either the statutory formula method or operating cost method. As Dominic has not made election under section 10, the statutory formula method will have to be used.

 The value of car fringe benefit would be computed as follows

Cost of Car*20% * Private use %

= 55000*20%*60%

= $ 6600

https://www.ato.gov.au/law/view/document?DocID=SAV/FBTGEMP/00008&PiT=99991231235958/

  • Value of interest free loan

The value of interest free loan will be calculated by applying the benchmark rate of interest to the amount of loan. The benchmark rate for year 2018-19 is 5.2%.

 

= $500000*5.2%*3/12 (as loan was given on 01.01.2019 interest will be computed for 3 months)

= $6500

https://www.ato.gov.au/rates/fbt/?page=1#Statutory_or_benchmark_interest_rate

  • Health Insurance premiums

The Taxable value of health insurance premium is the amount paid by employer i.e. $ 55000.

 

Calculation of FBT payable by Dominic for year ended 31st March 2019

 

Total taxable value of fringe benefits = $6600+$6500+$55000 = $ 68100

 

Particulars

Taxable Value

Grossed up rate

Grossed up Value

Car

$ 6,600.00

2.0802

$ 13,729

Loan

$ 55,000.00

2.0802

$ 1,14,411

 

 

 

 

Health insurance

$ 6,500.00

1.8868

$ 12,264

 

 

 

$ 1,40,405

FBT @ 47%

 

$ 65,990

 

 

 

Part 2

Calculation of net capital gain or loss for year ended 30 June 2019

Capital gain/loss on sale of rental property

The value of Net Sale proceeds will be equal to $ 1468000 ( Sale proceeds less selling costs)

The cost base of the rental property would include below items:

  • Purchase price of property
  • Remaining portion of loan application fee (1/5th of loan application fee would have been claimed against income from rental property)
  • Stamp duty and legal fees paid in connection with the property
  • Remaining Written down value of the refrigerator purchased on 1 November 2018 (after providing for decline in value for the relevant number of days)
  • Cost of replacement of roof of $ 35000 ( as it is a capital improvement to the property)

 

Method of calculation of CGT

Capital gain on BHP shares, Antique clock and Mercedes sports car

Capital gains on these three capital assets will have to be computed normally an as none of these 3 assets are exempt from CGT.

BHP – Indexation or Discount whichever is more beneficial.

Antique clock- Only discount method can be used, indexation not available as it was not purchased before 21.09.1999. https://www.ato.gov.au/General/Capital-gains-tax/Working-out-your-capital-gain-or-loss/Working-out-your-capital-gain/The-indexation-method-of-calculating-your-capital-gain/

Mercedes sports car – same treatment as Antique clock

 

Part 3

Income Tax deductions that can be claimed by Dominic for year ended 30 June 2019

1. Borrowing cost

Deduction for borrowing cost incurred in relation to rental property (1/5th of 4000)

 

2. Deduction for decline in value on refrigerator

 

3. Capital works deduction under Division 43 on value of capital improvements to roof

 

4. Repairs to door $ 900

https://www.ato.gov.au/business/depreciation-and-capital-expenses-and-allowances/capital-works-deductions/

 

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