X is a resident of Fiji. He is a married man with 2 school aged children. X's wife ('Wife') is a CPA. Wife has put her professional life on hold while the children are young and is engaged full-time in domestic duties.

X is a banker working as a senior manager for Bankco.

His terms of employment provide the following remuneration package:

• Annual salary $100,000.
• Annual housing allowance of $20,000.
• Standard employer contribution to FNPF. - Provision of a car by Bankco.
• Participation in Bankco's employee share scheme.
• Participation in Bankco's employee home loan scheme. - Free lunch time meals in the bank's canteen.

X and Wife are co-owners of the family home.

The property is mortgaged to Bankco to secure a home loan granted to X and Wife jointly.

X also owns a residential property (a three bedroom house) acquired as an investment with money irtherited from his deceased father.

      X is a beneficiary under a discretionary family trust established by his deceased father.     

More particular details concerning matters mentioned above follow:

Bankco provides X with a 1500 cc Toyota Corolla. The vehicle is for private use. In fact most days Wife uses the car. X walks to the office.

Bankco's employee share scheme entitles X to subscribe for 1,000 shares annually at $1 a share. The scheme requires an employee to retain ownership of one half of any shares acquired under the scheme so long as the employee remains an employee of the bank. The employee is free to deal with the remaining one half of shares acquired as the employee        chooses.

In December X applies for and is issued 1,000 Bankco shares. At this time Bankco shares are trading in the secondary market at $7 a share. Shortly after the issue X gifts 500 of the shares to Wife.

Bankco's employee home loan scheme provides employees of the bank or their spouses may borrow up to $300,000 at concessional rates to purchase a family home. The concessional interest rate is 1% below the banks regular home loan rate. In 2019 the concessional rate provides X and Wife a saving of $6,000.

All employees of Bankco are entitled to free lunch time meals in the Bank's canteen.

X acquired his investment property in 2018 for $280,000. The property has been leased to Tenant for 3 years at a monthly rent of $1 ,000. X claims an annual depreciation deduction for structural improvements. The three bedroom house is made of timber. The purchase price has been allocated equally between the house and the land on which the house stands.

In 2018 the trustee of the family trust makes no distribution of the trust's net income of $40,000. In 2019 the trustee of the family trust allocates trust income of $15,000 to X. This allocation is composed of undistributed income of the trust for 2018 ($5,000) and income of the trust derived in 2019 ($10,000). X uses the $15,000 trust payment to install a swimming pool in the family home.

Additional information

X makes regular contributions equal to 1/10^th of his gross salary to his church throughout the year. In November X makes a cash donation of $800 to the Fiji Red Cross Society.

Required:

First: identify what benefits received by X will be subject to FBT. Your answer should include reference to any relevant section.

Second: identify what receipts or benefits received by X will constitute exempt income. Your answer should include reference to any relevant section or regulation.

Third: identify what receipts or benefits received by X will constitute 'employment income' as defined in s.2.

Fourth: Calculate X's chargeable income and Income Tax for the year 2019. Explain your calculation and include reference to any relevant sections.

Answer rating: 100% (QA)

To calculate Xs chargeable income and Income Tax for the year 2019 we need to break down each component of his income and benefits and apply the relev... View the full answer