Short Case Study

Helen Clay and her nephew, Jake Mud are shareholders of Claymud Ltd, a close company that sells New Zealand beauty products. Helen is employed by the company and receives an annual salary of $120,000. You are provided with the following information about fringe benefits provided during the FBT quarter ending 31 December 2024.

a) On 1 October 2024, the company bought a new Nissan hybrid car for Helen's use. Helen uses the car 30% for business purposes and 70% for private use.

The company paid $59,100 (GST inclusive) for the car which is made up of:

Base price $55,000

Initial registration fee $ 1,500

Accessory - tow bars $ 600

Cost of sign writing $ 2,000

Total cost $59,100

In December 2024, the car was at a mechanic's workshop for 10 days due to a faulty seatbelt.

b) The company makes a 3% superannuation cash contribution to a superannuation fund for all its employees.

c) As Helen does not own a personal mobile phone, the company provided her with

a Samsung phone costing $1,000, primarily for her private use.

d) The company gave a $250 supermarket voucher to Helen's husband for his 50^th birthday.

e) The company purchased Christmas gifts valued at $280 each for all 10 of its employees (including Helen).

Jake's wife, Anne, is employed by Empire Ltd. Empire Ltd is an ordinary trading company wholly owned by the Royal Family Trust. Anne acts as a trustee of the Royal Family Trust, with beneficiaries being her two children, Mango (aged 18) and Peach (aged 15). Anne's brother, Steve, is the settlor of another trust, the Crown Trust. On 1 April 2024, Empire Ltd extended a loan to the Crown Trust at an interest rate of 4% per annum. Both trusts are complying trusts that were established several years ago.

ISSUE 1

For each of the benefits provided by Claymud Ltd mentioned above, briefly explain the tax

treatment and calculate or show the taxable value of the benefit for the FBT quarter ending 31

December 2024. Show all workings.

Assume Claymud Ltd files quarterly FBT returns and no benefits were provided in any other

quarters. The company also wishes to minimise its FBT liability and does not elect to treat any

fringe benefits as dividends.

Note: You are not required to calculate the amount of FBT liability.

You must use the template provided to present your answers. Do not change the format of the

template. You are also required to support your answers for each of the benefits with at least

two (2) section references from the Income Tax Act 2007.

ISSUE 1:

Explanation

Company car provided for Helen's use:

Employer's cash contribution to superannuation fund:

Samsung phone to Helen:

Supermarket voucher of $250 to Helen's husband:

Christmas gifts of $280 to each employee: