In this question: All of the amounts include Goods and Services Tax (GST) where relevant.

Fantastic news! We've Found the answer you've been seeking!

Question:

In this question:

• All of the amounts include Goods and Services Tax (GST) where relevant.

• The taxpayers are in possession of tax invoices where relevant.

• The employer uses the statutory formula method to calculate the taxable value of a car fringe benefit for purposes of fringe benefits tax (FBT).

• The employee provides the employer with all the relevant written declarations. Scott Frydenburg is a chartered accountant. He is employed as the Chief Financial Officer of Big Business Ltd. Big Business Ltd is listed on the ASX. The company owns and operates a chain of grocery stores Australia-wide. Hereafter, Big Business Ltd will be referred to as ‘BB’. These are Scott’s employment entitlements for the 2020–2021 FBT year ending 31 March 2021:

• Gross salary totalling $890,000.

• On 1 April 2020, BB purchases a new mobile phone for Scott’s exclusive use at a cost totalling $2,200. Scott only uses the phone for work purposes.

• On 1 October 2020, BB purchases a luxury vehicle at a cost totalling $85,000 for Scott’s exclusive use from that day. Scott keeps a logbook of all his trips with this car that indicates he uses the car 75% of the time for private purposes. During this FBT year, Scott pays $6,250 towards the running costs of the car.

• On 30 June 2020, BB pays Scott’s annual membership fee to Chartered Accountants Australia. This fee totals $770.

• On 1 November 2020, Scott and his spouse Julie receive a joint low-interest rate loan of $100,000 from BB. The interest rate applicable to the loan is 1% per annum. Scott and Julie do not have to make any repayments on the loan before 31 October 2022.

Scott and Julie use half of the loan proceeds to purchase listed company shares which they own jointly. These shares return fully franked dividends to them during the year. They use the other half of the loan to complete renovations on their Gold Coast holiday home.

You are required to: Calculate the FBT payable by BB for the FBT year ending 31 March 2021. Show all your calculations, provide reasons for your answers, reference relevant sections of the Fringe Benefits Tax Assessment Act 1986, provide explanations for reductions applied to taxable values, and clearly categorise each fringe benefit. Your answers must specifically address each of Scott’s employment entitlements. (11 marks)

Present your answers in a table using this four-column layout with the following headings:

Description Taxable value $ Gross up Taxable amount $.