A: Calculation of FBT
Fringe benefit tax is the tax which is applicable on the business organization on the value of facilities provided to its employees. There are various facilities that is provided by employer to it employees during the provision of their services. Facilities to employees includes funds provided to employees as a loan, car facility provided to employees, interest free or interest at concession rates are applicable on the loans provided to employees and many other facilities or perquisites to its employees. For calculating fringe benefit tax liability of the business organizations value of facility provided shall be calculated (Office, 2013). There is various valuation rules applicable and designed by the taxation authority made for calculating value of facilities provides. After calculating value of facilities provided to employee by employer, fringe benefit tax liability shall be calculated. There are few steps for calculating fringe benefit tax liability that shall be applied and they are as follows:
• Step 1 – First step to calculate fringe benefit tax is to calculate or measure value of facilities that is provided to employees.
• Step 2– Once value of fringe benefits or facilities provided by employer is calculated then there are some deduction that are applicable on it. In this step facilities on which goods and service tax is not applicable shall be done.
• Step 3– Under this step, value of facilities or fringe benefits on which goods and service tax applicable shall be calculated or are available as input credit (Wolfram, 2014).
• Step 4– Next step is to calculate taxable value of the those facilities or fringe benefits on which input tax credit of goods and service tax cannot be claimed shall be calculated. Taxable value of facilities shall be calculated by multiplying value of facilities with 1.8692.
• Step 5– Now calculate taxable value of facilities or fringe benefits on which input tax credit can be claimed. Taxable value is calculated by multiplying value of facility by 2.04647.
• Step 6- Taxable value of facilities calculated on the facilities on which input tax credit can be calculated and on which input tax credit cannot be calculated shall be calculated.
• Step 7- Value calculated in step 6 is the ultimate taxable value of finger benefits or value of facility provided. Fringe benefit tax rate is 47% and shall be charged on such value.
There are various facilities or fringe benefits that Rapid-Heat Pty Ltd, a bathtub manufacturer, has provided to its employees during the year. Therefore for this purpose, there is need to calculate taxable value of these facilities so that reliable fringe benefit tax can be calculated. Following are calculation of the value of fringe benefits or facilities:
Value of car provided and repair work on car
Car provided by the employer to its employee is also included in or considered as fringe benefit or facility provided by the employer. For calculating value of car facility there are two methods for the same. Rapid-Heat Pty Ltd can use either method for the same and these methods are operating cost method and statutory formula method. When cost of car and kilometer travelled by the employee or in this case Jasmine, are provided then statutory formula method shall be used. In this method, there is statutory limit of measuring value of taxable fringe benefit (Wolfram, 2014). Under this, value is calculated on the basis of kilometers travelled by the Jasmine. When there is no bifurcation has been provided in terms of personal use and official use of car then total kilometers shall be considered as used for personal use. Following is the statutory limit for valuing the fringe benefit:
Total kilometers travelled Statutory Percentage ( from 1st May 2017)
40000 20%
TABLE
Value of car = cost of car – input tax credit
Value of car = $ 33000 – ($ 33000 * 10 / 110) = $ 30,000
Since value of car falls under
