Calculation of Fringe Benefits Tax Liability
One of the most significant regulatory systems in any government is the system of taxation. It is considered so important due to its important role played in collecting significant amounts of reserve for the funds supervised by the government. The governmental funds are usually put to use for funding the expenditure that the government incurs for its development activities for the country. These include activities such as providing benefits for the defense forces, maintaining law and order throughout the country, for improving educational facilities and several others. Every country has its own system of taxation for collecting taxes from the citizens (Batalha, 2006). The systems are designed according to the needs and conveniences of the government officials. The policies of taxation need to be balanced according to the needs of the people and that of the government too. The Australian Taxation Office (ATO) is responsible for the governing of the tax charging and its collecting like other developed countries. The ATO has a prescribed law of taxation for each taxpayer and also for the different kinds of entities, such as the governmental and non-governmental organizations. The ATO imposes several kinds of taxes like taxes on capital gain, taxes on fringe benefits, income tax, and others. In accordance with the taxation rule, the taxes were charged from the country’s taxpayers (DiMatteo, 2013).
1. The proper framework of work helps to calculate the appropriate benefits and preparing the tax report on the fringe benefits. The fringe benefits taxes are also included in these cases. The fringe benefits represent the report through which the personal profit of the employees can be calculated. This shows the proper manufacture of the structure which is also illustrated as the central focal point for the purposing of structure this body (FBT compliance guide 2016, 2016). This defines the benefits that are also differed from the individual income tax. The calculations are also provided for the betterment of the charges that are specified for calculating the advantages. The suitable approaches of the study show the improvement of the financial report. The growth of the tax rate can be determined by the enhancement of the taxation system. For the improvement of the tax rate and the annual report regarding tax is shown by the fringe benefits. The fringe benefit also takes place to demonstrate the development of the benefits during the 31st March to 1st April. The proper improvement of the financial report and the work can show the increase in the tax rates which is about 47% including the Medicare levy. Apart from these cases, the fringe benefits are identified as the immunity of the many advantages that are easily recognized by Australian Government. +
The most significant benefits that are provided to the taxable value is of $300. Payments of loans related to the working levels. Then, rearrangement of the expenses of the workers is made. The fringe benefit can be achieved by the enhancement of the salary. The enhancement of the salary also includes the extracted amount which is more than $2000.the under mentioned items are liable for the fringe benefits. Living away from the housing payment, cars, credit, board, and debt waiver, airline transport, expenses payment, accommodation and building, property or land, car parking. The fringe benefit can include the other benefits which includes the cash benefits like- the salaries, payment, rewards or wages. According to the rules the company ABC ply ltd had a settlement with the mobile bills of the employees. Including GST the mobile bill of an employee was about $220 per month, and the company had to provide the bill (GST distribution review, 2012). The company is paying the school fees of Alan’s children. In the case of the appropriate analysis the insertion of the fringe benefit involves the final report of the tax rate. The company provides the mobile bill of Alan which was $2000 per month, and they try to improve the framework of the study. Alan was eligible for the improvement of the work and can able to provide flow to the improvement of the work. The appropriate proposal of the study can be shown by the implementation of the case. The proper structure of the work can demonstrate the tax rates related to the fringe benefit which can help to calculate the taxation rate. The company has spent $66600 with GST to a Thai restaurant for dinner with their partners and their twenty employees. This amount is also considered under the fringe benefits tax (Harvey, 2007).
- The fringe benefit taxes are paid by the ABC for Alan’s children school fees, which is $20,000 per year. This tax is GST-free and considered as the type 2 benefit. The tax rate is applicable @ 1.9608. The tax rate shows the appropriate enhancement of the value. The proper framework can calculate the value of tax rate(Helm, 2007). In this case, the enhancement of the work can determine the case study very quickly. The calculation formula of the tax rate is given below:
Determining Whether $600,000 Receipt is Ordinary Income
$20,000 × 1.9608 = $39,216
The rate of FBT is 49% therefore $39,216 × 49% = $19215.84
The prize of the handset given by the company is $2,000, it also includes the GST, and it is considered as the type 1 benefit. The tax rate is applicable @2.1463.
$2,000×2.1463 = $4292.60
The rate of FBT is 49% therefore $4292.60×49% = $2103.374
Including GST the company pays $6,600 in a Thai restaurant for providing the dinner of 20 employees. This payment is considered as type 1 benefit. The tax rate is applicable @ 2.1463
$6,600×2.1463 = $ 14165.58
The rate of FBT is 49% therefore $ 14165.58 × 49% = $6941.1342
- No, in this case, the same amount will be paid by the company.
- Yes, this defers the previous one in that respect is in that case the company’s clients are also included in the dinner party and in this case the fringe benefit taxes are not included. So, in this case, the company employees were doing their duty during the business meeting(Krever, 2007). The implementation of the rules of the FBT can accurately illustrate and describe the enhancement of the case. The FBT never involves the calculation of the enhancement of the case. The proper analysis of the case study of the ABC Pty Ltd can show the enhancement of the work on the case. The benefits are shown by the appropriate involvement of the employees in the FBT.
According to the present case study, suppose someone named PETA which is a taxpayer of Australia purchased a house in KEW before two years. The house contains two tennis court with the very bad condition. For two proper reasons PETA bought that house that she wanted to live in that home with her family and she wanted to renovate the tennis courts and sell them at a beneficial rate. After renovation in the present taxation year, the local club management wants to purchase the tennis courts from her (Batalha, 2006). PETA accept the proposal of them and sells them in return of $600,000. In the time of renovation, she invests $1000, 000. The section 6 and 5 considered the ordinary income which includes the ordinary income like the receipt of $600,000.
Income Tax Assessment Act 1997- Sec 6-5
The Australian Income Tax Assessment Act 1997, shows that the income from any usual method can be measurable by the section of the 6-5; this income is known as the ordinary income. In the case study of the Australian resident, the ordinary income becomes added to the individual assessable income. The individual tax governs indirectly and directly forms of the source. It is applicable for the all that are stay out or stay in the Australia during the taxation year (Krever, 2007).
The ordinary conception of income is considered under the section 6-5 (1) of the income tax assessment act of 1997.
The following three components are the major part containing by the ordinary income:
- The income which is come from the personal effort like wages and salary.
- The income comes from the selling of the property or assets like dividends, rent, and interest.
- Income is coming from any farming, business or retail sales.
According to the information in the given case study, a tennis club on the next door had made an offer to buy the old courts. They sought for their restoration to a good condition. Peta hence accepted the proposal and prepared for selling the courts by spending $100,000 for their renovation. The current year of taxation witnessed their sale for $600,000. It is clearly evident from the case that Peta had sold the courts after completing the construction. The measurable income is considered by the ordinary income which can be determined by the Section 6-5 of ITAA 197. The common concept tells that income has no definition, but it can be considered as the amounts which people would normally regard as income. PETA spent the money to renovate the court for selling them. The profit derived after the courts were sold, was an amount of $ 500000. The taxation law stated that the income derived from selling the tennis courts would be taken as ordinary income. The ordinary income had three parts:
- Income derived from personal exertion
- Income derived from property
- Income that the business generated
These would be taken within income that is assessable, so they must be differentiated. Various rules and regulations are there which are related to the ordinary income which can include the measurable income. The ordinary income includes the assessable income, and an Australian resident requires paying the tax. The ordinary income can be differentiated into two parts such as- business income and the personal income (Krever, 2007). The taxpayer needs to follow the rules concerned with taxation. In the case of a resident of Australia, the direct and indirect both income will be measured and comprises the ordinary income. The ordinary income is obtained considering all the income sources during the entire financial year. During any financial year the ordinary income requires the measurable income. The rules and regulations of taxation should be followed by the common people.
Conclusion
According to the study, after selling the tennis court, PETA earned income. This income will be considered as a part of the ordinary income as per the section of 6-5. The courts were sold for earning income which should be put under assessable income. The system of taxation is the most important for any government (DiMatteo, 2013). The Australian tax office (ATO) is responsible for the regulation of the taxation system. The various significant taxes such as that on ordinary income and gains on capital, GST and taxes on fringe benefits contribute substantially to the government’s fund. The Australian Tax Office (ATO) also governs the calculation of the tax and the annual report regarding the tax.
References
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Batalha, L. (2006). FBT essentials. [Sydney]: Information Exchange Corporation.
DiMatteo, L. (2013). Commercial Contract Law. New York, NY [etc.]: Cambridge University Press.
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Helm, A. (2007). The law of war in the 21st century. Newport, RI: Naval War College.
Krever, R. (2007). Australian taxation law cases 2007. Pyrmont, N.S.W.: Lawbook.
Nicoll, P. (2016). Audit in a democracy. London: Routledge.
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Woellner, R. (2013). Australian taxation law 2012. North Ryde [N.S.W.]: CCH Australia.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. (2016). Australian Taxation Law 2016. Melbourne, Vic.: Oxford University Press.
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