Question

Alex is an employee at Big Country Producer Pty Ltd. He has negotiated the following remuneration package:

•        Cash salary of $200,000.

•        On July 1, 2018 Alex was given a loan of $15,000 which he used to pay for an overseas holiday for her family. The loan is expected to be repaid over 3 years with an instalment of $5,000 due on June 30, 2019, 2020, and 2021. There is no interest charged on the loan.

•        Payment of his health club membership ($3,600 per year).

•        Big Country Produce also provided Alex with the latest mobile phone, which cost $2,000 (including GST). 80% of his mobile phone use is work related.

At the end of the year Big Produce hosted a dinner at a local Italian restaurant for 10 employees. The total cost of the dinner was $2,500 including GST.

The business does not elect to use the 50/50 or 12-week register methods.

REQUIRED:

(a)  Advise Big Country Produce of the FBT consequences arising out of the above information, including calculation of the taxable value for each item listed.

(b)  Calculate the FBT liability for the year ending 31 March 2019. Assume that Big Country Produce would be entitled to input tax credits in relation to any GST-inclusive acquisitions.

Answer 1

a)
Cash Salary is out of FBT taxability.
As nil interest charged than Market rate . So loan will come to the taxability for FBT.
Payment on health membership is taxable to FBT liability for $ 3,600.
80% of Mobile phone is used work related so only 20% shall be considered for FBT Tax. Which is 20% of $ 2,000 that is $ 400.
Entertainment cost for fbt shall be dinner cost arranged for employees	$ 2500
As business does not use 50/50 or 12- week register method, So FBT is based on Actual Expenses Method .
b) FBT is to be charged as per rate applicable for that period in that country. As name of country is not given.
Normally FBT is to be computed on taxable amount including GST.