Question

CarSales Pty Ltd is a resident company that owns and operates a car dealership. During the year, the company has provided the use of a car to each of the following:

a) Damon, a salesperson, receives the use of a Lexus;

b) Damon’s wife Kylie, who does not work at the dealership, receives the use of a Citroen;

c) Nigel, who the company will employ as an accountant as soon as he finishes his professional exams, is given the use of a Honda;

d) The dealership gives Gabby the use of a Mercedes. Gabby conducts business as an advertising consultant and has agreed to receive use of the car instead of charging Kamikaze a fee for her services;

e) Tristan, a former employee who left after 20 years of service with the company, is provided with the use of a Chrysler;

Required: Giving reasons, identify which of the above transactions represents a fringe benefit.

Answer 1

The detailed answer for the above question is provided below:

Fringe benefits are said to be part of the employer employee relationship benefits. This is over and above the financial pay given to the employee. Retirement benefits, various employee insurance, cafeteria assistance all are benefits given.

Answer a:-

Damon is the salesperson receiving the benefit to use lexus, since he is an employee this forms a part of fringe benefit as per the above definition.

Answer b:-

Kylie who is Damons wife is also receiving benefit to use car Citroen, but she does not work at the dealership. If she has received this benefit because of her spouse working at the dealership then this forms part of fringe benefit.

Answer c:-

Nigel has not been yet employed, thus the benefits enjoyed by use of Honda does not constitute benefit under employment and thus this is not a fringe benefit,

Answer d:-

Gabby is a professional who is rendering professional services to the dealership and there is no question of employment here. The Kamikaze used is instead of the services fees. So this is not a part of fringe benefit.

Answer e:-

Fringe benefits as defined above also includes retirement benefits, since the former employer has received this benefit after his 20 years of services qualifying as retirement benefits this will become fringe benfit,