Answered Same DayDec 29, 2021HI6028

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Sumit answered on Jan 28 2021
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HOLMES INSTITUTE
T2 2020
HI6028
Table of Contents
Question 1 - Calculation of FBT    3
Question 2 – Capital Gains Tax Outcomes    5
References    6
Question 1 - Calculation of FBT
When an
employer provides benefits to its employees other than by way of Salary and Wages it is called a Fringe Benefit. These benefits include any right, privilege, service or facility designed to otherwise reduce the income tax liability of an employee. Under Fringe Benefits Tax Assessment Act 1986 (FBTAA) an employer providing such Fringe Benefits is liable to pay a Fringe Benefits Tax on the taxable value of the Fringe Benefits instead of the recipient of such benefits i.e. the employee.
Provision of a car by an employer to its employees not exclusively for work purposes falls under the purview of Fringe Benefits. Even if the car is used partly for private purposes or even available for private use a Car Fringe Benefit arises. Such a car may be owned or leased by the employer.
In the given instance Perisher Pty Ltd bought a Car on 01/05/2019 and provided it to one of its employees Nikita who doesn’t use the car solely for business purposes. The car thus used privately or available for private use of Nikita attracts FBT provisions.
Now since Perisher is supposed to be paying FBT on the taxable value of the car provided to Nikita we need to ascertain the taxable value as per FBTAA. There are two methods by which taxable value of a car can be calculated as under:
· Statutory Formula Method (s.9 FBTAA) which is the default method of calculating the value by applying a statutory rate to the cost base of the car
· Operating Cost Method (s.10 FBTAA) which takes into account the actual costs of running the car i.e. fuel, repairs, registration, insurance, etc. and deemed depreciation and interest costs.
Under the Statutory Formula Method the taxable value of car...
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