Question

Ronny is your client and has come to you to prepare his tax return. During the 2018-19 financial year, Ronny has disposed of the following assets:

1. Ronny purchased a motor vehicle for personal use in May 2017 from an auction warehouse for $25,000. Ronny has spent $5,000 on improvements to the vehicle. In June 2019 Ronny sells the vehicle for $45,000.
2. Ronny purchased a vacant block of land in May 1991 for $300,000. In April 1998 Ronny subdivides the vacant block of land into two equal portions, both portions are valued at $200,000 each. In May 2019 Ronny sells one of the vacant blocks of land for $400,000
3. Ronny acquired ANZ shares on 15 December 2018 for $25,000. He sold those shares on 2 May 2019 for $40,000.

Calculate Ronny’s Capital Gain, subject to Tax for the year ending 30 June 2019. Provide justification for your calculations using legislation and case law.

PART B

Your client City Wreckers Pty Ltd has 25 employees and has approached you for advice on the following transactions:

1. Payment to employee for an estimated cost of electricity used in his home workshop.
2. Loan to an employee at no interest. The employee used the loan as a deposit to buy a holiday home with intention to rent it out.
3. Payment of an employee’s childcare fees.
4. Providing alcohol for Friday BBQ which is held each week after work.
5. $150 gift card to all employees as a Christmas present.
6. Payment of employees’ registration for the wrecker’s workers union.
7. Payment of superannuation contributions.

Advise City Wreckers Pty Ltd which of the above items will be subject to Fringe Benefits Tax. Provide justification for your calculations using legislation and case law.

Answer 1

Part B -

g)

Payment of superannuation contributions.

Companies give some fringe benefits to all their employees and some only to those at the executive level for costs related to their work. Some others may also be extended for increasing general job satisfaction. Some of the common fringe benefits are telephone reimbursements, employer’s contribution to the superannuation fund, and access to creche services. These could also include perks like tuition assistance, health insurance, childcare reimbursements, subsidised cafeteria, free bus service for commute, employee discounts and employee stock options.