Fiona Plum is a sales manager with Multi Plan, a firm of computer distributors. During the2013/14 FBT year Fiona received from her employer a base salary of $40,000, an overseas holiday for $3,000, reimbursement of her private telephone expense of $560 and they paid$730 for her CPA professional membership. On 1 April 2013 Fiona also received from her employer a car and a low interest loan of $75,000. The interest rate on the loan was 1.45%. On 1 April 2013 Fiona used $20,000 of it to buy some shares in BHP, $4,000 to extend her overseas holiday and the balance to reduce the mortgage on her home. The car cost $60,000 (including GST) and she drove 50,000 kms over the year, 10,000 kms were for private purposes. Fiona paid $200 to mend one of the car’s tyres while she was travelling and was not reimbursed. Total car expenses (including Fiona’s contribution) were $12,200. 

Required 

a. Calculate the FBT liability for the 2013/14 FBT year – show all workings and include all legislation (even if items excluded). 

b. Before FBT was introduced, many believed that receiving a car from your employer tax free was tax avoidance. Explain tax avoidance and why FBT was introduced.

Answer rating: 100% (QA)

The practice of receiving a car from your employer tax free is known as tax avoidance It is believed that this is tax avoidance because the car may be ... View the full answer