Question

Elizabeth accepts an offer of employment made by Aussie Models Pty Ltd to be their new marketing manager. Her salary package includes:

Payment of her trip to London valued at $14,000.  Elizabeth would not be entitled to claim a deduction for this amount under the Income Tax Assessment Act 1997 or 1936 had she paid the amount.  Aussie Models Pty Ltd is not entitled to claim an input tax credit for GST purposes.

Required: Advise Aussie Models Pty Ltd of the Fringe Benefits Tax payable (rounded to the nearest dollar) of the fringe benefit for the FBT year ended 31 March 2018.

Answer 1

Let us understand the FBT i.e. Fringe Benefit Taxes, It is a tax on the benefits that are provided by employers to employees in addition to salary.

Payment of Elizabeth for her London Trip valued at $14000 is taxable under FBT and as it is mentioned Aussie Models Pty Ltd is not entitled to claim an input tax credit for GST purposes , Lower gross up rate is used ., As per the FBT Act Lower gross up rate for year 2018 was 1.8868 and FBT rate was 47%

Fringe Benefits Tax Payable for year ended on March 2018 is as follows :

Step 1 : Reporting Value = taxable Value * lower gross up rate

= $14000*1.8868

= $ 26415

Step 2 Fringe Benefit Tax = $ 26415 * 47%

= 12415 $

Fringe Benefits Tax payable for the year ended on Mar 2018 is 12415 $