Question

Monica accepts an offer of employment made by HesstyModels Pty Ltd (Hessty) to be their new marketing manager. Her salary package includes:

• Payment of her family’s health insurance premiums. The cost is $10,000. Monica would not be entitled to claim a deduction under the Income Tax Assessment Act 1997 or 1936 had she paid the amount. Hessty is entitled to claim an input tax credit for GST purposes. The payment was made on 1 April 2016.

Required:

Advise Hessty of the fringe benefits tax payable, if any,(rounded to the nearest dollar) for the FBT year ended 31 March 2017.

Answer 1

Sol :

If Providing a service including GST having a GST registered claiming input credit of GST is known as Type 1 Fringe benefit.

To calculate type 1 fringe benefit,

Step 1 : Calculate taxable value of fringe benefits provided where Input GST is claimed,

Step 2 : Multiply the taxable value with the gross up rate of 2.0802

Grossing up means incrasing the taxable value of benefits employer provide to reflect the gross salary employees would have to earn at the highest marginal tax rate to buy the benefits after paying tax.

Step 1 = 10000 assuming the amount as taxable value

Step 2 = 10000 * 2.0802 =20802

Fringe benefit tax rate for year ended 31Mar,2017 is 49% currently for Mar'20 is 47%.

FBT = 20802*49% = 10192.98.