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Scenario 1: Loo is an employee at a large real estate agency. He has negotiated the following benefits with his employer: Provision of a car for work and personal use. Loo was provided with the car for the period 1 April 2022 to 31 March 2023. The leased car value was $22,000 at 1 April 2022 and the car had only been leased for a year at that time. Loo is required to pay for any petrol costs which he has determined to be $1,300 for the period 1 April 2022 to 31 March 2023. Provision of the latest model smart phone on 1 April each year as Loo is usually 'on the street' and needs a good phone to do his job. Loo estimates that he uses the phone 70% for work purposes. The phone was purchased new on 1 April 2022 for $1,100 (including GST). Advise Loo's employer as to the FBT consequences (including calculation of any FBT liability) arising out of the above information. You may assume that any benefits are Type 1 fringe benefits.

Scenario 1: Fringe Benefits Tax (FBT) for Loo's Employer

1.1 Overview

Loo, employed by a real estate agency, has been provided with a leased car for both personal and work-related use. Additionally, he receives a new smartphone each year to support his job duties. The following section outlines the FBT implications of these benefits.

1.2 Car Benefit and FBT Calculation

Details of the Benefit:

• A leased company car valued at $22,000 (as of 1 April 2022) was provided to Loo from 1 April 2022 to 31 March 2023.
• Loo covers his own fuel expenses, amounting to $1,300 for the year.

FBT Calculation Using the Statutory Formula Method

Item	Calculation
Car Lease Value	$22,000
Statutory Percentage	20% (applicable to cars provided after May 2011)
FBT Base Value	$22,000 20% = $4,400
Employee's Contribution (Fuel Cost)	$1,300
Taxable Value After Contribution	$3,100
Type 1 Gross-up Factor (2022-2023)	2.0802
Adjusted Grossed-up Value	$3,100 2.0802 = $6,448.62
FBT Rate (2022-2023)	47%
Total FBT Payable	$6,448.62 47% = $3,030.85

Legal Basis

• Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986)
• ATO Guidelines on Vehicle Fringe Benefits

Employer Obligation

Based on this calculation, the employer must pay $3,030.85 in FBT for the car benefit.

1.3 Smartphone Benefit and FBT Considerations

Details of the Benefit:

• Loo receives a new smartphone every year to assist with his work duties.
• He estimates that 70% of the phone usage is for work-related activities.
• The phone was purchased on 1 April 2022 for $1,100 (including GST).

FBT Implications:

If the majority of the phone's usage is for work-related purposes, it may qualify for an exempt benefit under either the otherwise deductible rule or minor benefits exemption.

Legal Basis

• FBTAA 1986
• ATO Guidelines on Work-Related Use of Devices

Employer Obligation

If Loo's work usage is well-documented, the smartphone may be exempt from FBT, avoiding any tax liability for the employer.

1.4 Recommendations for the Employer

• Maintain Proper Documentation: Keep accurate records of the car's usage and Loo's fuel expenses to ensure compliance.
• Substantiate Business Use of the Smartphone: Maintain evidence of work-related phone usage to support the FBT exemption claim.

Conclusion

Loo's employer is responsible for FBT on the car benefit ($3,030.85) but may be exempt from FBT on the smartphone, provided business usage can be substantiated. By keeping proper records and ensuring compliance with ATO regulations, the employer can effectively manage tax obligations.