Page 1 of 2 HA3042 TAXATION LAW TRIMESTER 2, 2012 INDIVIDUAL ASSIGNMENT Assessment Value: 20% Instructions: 1. This assignment is to be submitted in accordance with assessment policy stated in the...

Fringe benefits
Australian Fringe Benefits tax is the tax which is to be paid by the employer on the respective
benefits that they provide to their respective employees. This tax is generally required to be paid
if the employees are given benefits in relation to their personal benefits and without any
particular occasion. This type of tax is to be paid by all types of organizations whether they are
corporate, firms or individuals. These benefits are generally provided because the employees
become more loyal to the company and they could work in a motivational manner. These
benefits are only for those who are given such benefits by the employer and they can utilize it.
So even if any enterprise is not under the purview/ regime of Income taxes it has to pay its FBT.
The calculation of the FBT is done by calculating the value of the fringe benefits and applying
the tax rate on the same. This taxable value is computed as the amount of benefit provided by the
employers free of cost to the employee’s and the amount which is being recovered from them is
deducted from the above. In the different cases the calculation differs and the amount to be
charged is the benefit free of cost provided to the employees by the employees
The government performs assessments on the same and it has to be provided regularly in the
books so that it could be set off during assessment period of FBT.
Answer To Practical Questions
a) As we are aware that FBT is the tax payable on the benefits provided by the employers in
the normal course of business, but it can be well seen that in the current case Kerry has
been gifted the vouchers as a Christmas gift and it might be possible that it is the practice
of the employees to grant Christmas gifts to the employees. So these gifts provided to
Kerry are not taxable in nature as they fall under the group of entertaining staff which is
an exempt benefit under the Australian FBT. So these benefits will also not be shown in
the tax computation of Kerry and so this being a small benefit will not be taxable in the
hands of the employee or the employer. As gift vouchers are very small benefits and the
government will not suffer ant tax loss because of it.
So it can be advised that there will be no tax consequences for this transaction
for either Kerry or the University under the provisions of Australian FBT.
b) As per the income tax provisions of Australia it has been clarified that the employee will
be chargeable with the benefits provided free of cost which will be included in their
salary as perks. This will be the amount of loan given to the employer fee of cost. This
will be included in the tax computation of Sorella.
But the Australian Fringe benefit tax rules clarify that the value of the loan which is
being provided at a cost other than normal rates of interest. The amount of fringe benefits
calculated will be the difference of the interest rates between the market rate and the rate of loan
given. So in the initial part the fringe benefits will be the difference of the market rate minus 0%
as the loan is an interest free loan. Now comes the second part which deals with the waiver of the
loan by the employer on 15
th
January 2012. This includes the half of the loan which is being
waived and will be taxable in the FBT rules as the debt waiver tax, under which the amount of
debt foregone is...