I have attached already Document Preview: HI5028 TAXATION T2, 2013 ASSIGNMENTInstructions: This assignment is to be submitted by the due date in both soft-copy (Turnitin – Bb) and hard copy.The...

Answer to Question 1A
Fringe Benefits Tax (FBT) is paid by employers to their employees or their associates
(generally family members) in respect of their employment on certain benefits which the
employers provide to them. Fringe Benefit Tax is a different concept from income tax and is
actually based on the taxable value of the fringe benefits which the employers provide to
their employees.
The benefit employers get from this concept is that they can claim a deduction from tax for
the cost of providing these benefits. Therefore, Fringe Benefit Tax is the tax which is payable
on the provision of these benefits. A fringe benefit is a benefit which is provided to an
employee (or their associates) because that person is either an employee or is a former
employee will be an employee in the future.
In the given case, Robin Hood wants to recognize the efforts of his employees by hosting a
luncheon and is also considering giving gifts to his employees. There are three possible
situations in the current instance and we can see the implications of each of them:
1. Only the current employees attend: If only the current employees attend this
luncheon, the cost of providing this service would be liable to Fringe Benefit Tax and
therefore the law firm would be able to claim an income tax deduction on the said
amount.
2. Current employees and their associates attend at a cost of $ 180 per head: Fringe
Benefit Tax covers under its ambit associates of the employees i.e. family members.
Hence, there is no difference between hosting a lunch for employees only or
employees and their associates as income tax benefit would be eligible in either
case.
3. Current employees, their associates and some clients attend at a cost of $ 365 per
head: Whereas employees and their associates are covered under this provision of
Fringe Benefit, clients are not covered. Hence the cost incurred on them would not
be eligible for income tax deduction.
Therefore, the best option for Robin Hood would be too to host a luncheon for hiscurrent
employees and their associates at a cost of $ 180 per head and get an income tax deduction
on the same. However, if he considers giving them a gift, it would not be allowed as a
deduction since payments or financial benefits are not covered under the provisions of
Fringe Benefit Tax.
Answer to Question 1B
A care fringe benefit is levied on a vehicle which is owned by the employer but is used by his
employee. There are two methods by which we can calculate the Fringe Benefit Tax. One is
the Statutory Fraction Method and the other method is the Post Tax Contribution Method.
The Fringe Benefit Tax liability would be calculated on the basis of the kilometres travelled
and it would not make a difference whether it had been used for private purpose or
business purpose. It also depends on the fact that for how many days the car was available
with the employee. If the car was not available for the entire year then the calculation
would be made on a proportionate basis. For ex. if the car was made available to the
employee for only 200 days out of...