Question

PART A                                                                   

Required: Advise E Pty Ltd regarding the Fringe Benefits Tax implications of the facts below. You are not requiredto calculate the actual FBT liability.

E Pty Ltd is an engineering firm that employs Naomi, who is entitled to a salary of $150,000. She reaches a salary sacrifice arrangement with E Pty Ltd where, in exchange for giving up part of her salary, E Pty Ltd will pay for:

• A laptop (that she can keep) that she intends to mostly use for work.
• Extra superannuation contributions.
• The interest expenses on her investment property loan.

PART B                                                                   

Required: Advise Newtech as to the GST implications for the following transactions:

An IT development firm, Newtech, which is registered for GST, undertakes the following transactions for the GST period (where GST applies, prices are GST inclusive):

• Purchases of fresh fruit from a major supermarket for the staff room: $1000.
• Purchase of a new laptop from a major department store: $2000.
• Payment of staff salaries: $300,000.
• Payment of water utilities bill: $500.
• Sales of services: $600,000.

Answer 1

:PART A:

Fringe benefits tax are taxed paid by employer along with his income tax irrespective of fact that wheather he is liable or not in lieu of benefits given to emlpoyee such as include health, disability and life insurance.

1) Properties like laptops, cameras, cars etc. are exempted from taxes if the employee uses them only for work. As Naomi mostly uses the laptop for her office work, it is not taxable but if she uses it for her personal use, she will not be exempt from tax.

2) super annuation contributions are paid for the benefit of an associate of an employee, such as a spouse, they are considered fringe benefits. Similarly, where contributions are paid to non-compliant super funds, they will be considered fringe benefits.

3)Interest expenses on investment property loans are considered as fringe if the employer is providing them to the employee at lower interest rates and money is deducted from taxable income which reduces the tax .

PART B

Ans: 1) Purchase of fresh fruits- .all the fresh/ unprocessed or Chilled fruits and vegetables purchased directly from agriculturist, dealer or retailer are exempted from GST.

GST CHARGED = O

2)Purchase of new laptop worth $2000 - Under GST laptops and desktops will attract a tax rate of 18%. So at the time of purchasing the laptop Newtech paid 18% tax to the supplier/department store.

(Note- Price including GST @ 18% is 2000.

if cost is 100+tax 18=total cost 118

here total cost is $2000.

to calculate the tax amount - (2000/118)X18 = $305

so tax paid by Newtech = $ 305

Cost excluding tax- (2000-305)= $1695

3)Salary paid to staff- There is no GST levied on salary. In the GST rules it is mentioned that no GST will be levied on salary of employees as salaries are taxable under income tax act seperately.

4)Payment of water utilities- GST on water and water products are 12%. So Newtech has to pay 12% of tax to the water supplier or water supplying authority.

(Note- Charges including GST @ 12% is $500

if cost is 100+tax 12=total cost 118

here total charges is $500

to calculate the tax amount - (500/112)X12 = $53.57

so tax paid by Newtech = $ 53.57

5)Sale of services worth $600000- GST on IT sector will attract tax rate of 18% for the services provided by IT companies. Newtech has to collect tax @ 18% from the persons or companies availing services from them. After collecting tax from them Newtech need to pay the collected tax to the Government.

(Note- Price including GST @ 18% is $600000

if cost is 100+tax 18=total cost 118

here total cost is $600000

to calculate the tax amount - (600000/118)X18 = $91525.42

so tax collected by Newtech = $ 91525.42)