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ABC Limited: Australian Tax Law

Answer the given questions after reading the case study of ABC Limited related to Australian tax law.

Answer

AUSTRALIAN TAX LAW

TAXATION

Answer to Question 1

Part a)

This particular case study wants us to give advice to ABC limited regarding  The Fringe Benefit Tax applications. Fringe benefit TaxationFringe Benefits Tax (FBT) is amount of duty  owed by companies for welfares given to any worker or employee or any associate related to an employee such as any family member such as son, daughter, mother , father , spouse. in place of wage or wages. This is said to be different from income taxation and is usually calculated on the benefits on the fringe provided.  Everybody needs to get register for FBT to be applicable to use this taxation policy.

We would consider one thing as to why would anyone offer fringe benefit

The reason is because to have the best workers for the business  one should give them some non income surprises and benefits in the form of any vehicle, any car parking, and loans with low interest,and expenses which are of private nature.

If a business provides Fringe benefits to employees thenone nends to calculate

  • Calculate the amount of tax one has to pay
  • Registeration for FBT needs o be done
  • Necessary records are to be kept
  • Report fringe benefits payment summaries
  • Return should be filled and FBT is to be paid to the official.
  • Expemtions which are applicable to FBT needs to be understood
  • understand which benefits are exempt from FBT.

Fitness Australia wants to give  an even singing field and outspread this precise to insignificant and mediumly sized  businesses which amounts for for 70% of the jobs in Australia, not only for those  that have an onsite facility for fitness. Currently the FBT is a major inhibitor to office well-being, with exceptions available only to large industries with on-site suitability facilities

Some of the particular benefits are there on which  fringe benefit tax would not be valid like bags, tools of skill and processor software. In the Section 54 of the Fringe Benefit Assessment Act 1986, it is transparently declared that whenever business is captivating its workers for any type of personal outing either for eat or dinner then it would fascinate fringe benefit tax. The various fring befit cases that will be applicable are given below :

1.    ABC ltd had a employee called Alan who was a slaried employee. He was given a salary by the company  in which mobile bill was also included in that  and was borne by the company. ‘Yearly the company would pay $2400 . THis would automatically amount to fringe benefits tax as it is for the benefit of the employer. As per the provisions ringe Benefits Tax (FBT) is amount of duty  owed by companies for welfares given to any worker or employee or any associate related to an employee such as any family member such as son, daughter, mother , father , spouse. in place of wage or wages.

2.    Company also borne the school fees for Alan. This would automatically attract fringe benefit tax

3.    The company also gifted him a mobile handset worth $2000. 

 As per Fringe Benefit Assessment Act 1986, if any corporate gives any mechanical device to its employees then it would be exempted from fringe benefit tax.Hence  no tax would be implied.(FringeBenefit, 2017)

4.    Business had taken 20 workers for a banquet party. Feast was in a local buildings and not in the business grounds. The dinner amount paid by the corporation was $6,000. Therefore ,fringe benefit tax has to be remunerated on it.

The total fringe benefit tax to be waged by the corporation would be Alan is an worker at ABC Pty Ltd (ABC). As per the Fringe Advantage Tax Law the tax rate appropriate in Australia for the year ended 31st march 2016 is 49%. Hereafter the fringe advantage tax which is to be compensated by the corporation would be $28,400 *49% = $13,916.

Part b)

As discussed earlier, Fringe Benefits Tax (FBT) is amount of duty  owed by companies for welfares given to any worker or employee or any associate related to an employee. The reason is because to have the best workers for the business  one should give them some non-income surprises and benefits in the form of any vehicle, any car parking, and loans with low interest,and expenses which are of private nature. In this case the total strength of the company is 5. SO it is said to be a small company . . Being a unimportant or minor corporation will not give any exclusion to the corporation from fringe benefit if it has taken all its workers for a feast outdoor the business properties. Fringe benefit accountability even in this case would be identical as part a. Hence outlying benefit tax to be remunerated by the corporation would be $13,916

Part c)

The third case is wholly dissimilar from the first two parts. The worker strength of the corporation is the identical as part a is 20. In this time and case along with the workers and their companion’s customers of the corporation was also contemporary. So it is measured as a proper assembly of the corporation. It would not be measured as a team eat, and would be considered as client meeting. Fringe benefit liability in this case would be $2,400 +$20,000 = $22,400

Fringe benefit tax to be paid would be $22,400 *49% = $10,976. (1986, 2017)

Answer to Question 2

In this particular case we want to assist that if the unloading of $600,000 should be painstaking as normal income under Section 6-5 of the Income Tax Assessment Act 1936. Section 6-5(1) of the ITAA 1997, comprises in quantifiable income, income rendering to ordinary concepts.'Ordinary concepts' income is not distinct but is measured to be what quantities to that which folks would usually reflect to be revenue, or which turns within the mutual law idea of pay. This section highpoints the necessities linking to ordinary receipts. If a individual is an Australian occupant then the quantifiable revenue would comprise commonplace income straight or ramblingly resulting from all sources whether the revenue is earned in or external Australia throughout the respective revenue year. It is not required that all the proceeds will be measured as commonplace income. There are some returns which which should not be included are discussed below:-

  1. If revenue is conventional from Revenue defense assurance strategy.
  2. Rented amount from any individual  should not be included
  3. If GST is taken by an then the proceeds of income should not be considered as ordinary income
  4. Prize won by any individual not involving to its occupational has to be omitted  

If any revenue is originated from the hobby of  a person then it should be omitted as well from the normal revenue

As per Capital gain provisions any asset which is a capital asset is sold to a person at an amount higher that what it was purchased for then it will be considered as capital gain. Proper indexation would be applied.(Exfin, 2017)This case is about an individual named as Peta who owned house which is measured as principal asset. Tennis courts was attached to the house but meanwhile the propertion of t courts was not provided, it was expected that it encompasses of 20%.

For profit generating purpose the house was purchased The sum acknowledged by Peta from the club is not to be considered as income. Afterwards it should be considered as part of  capital asset it has to be observed as a wealth receipt. Now since it is a capital receiving it should not be considered as income that is ordinary. It is similar as High court case. The case was among FCT v cooling. She invested $100,000 for the face-lift of the tennis court, it would be considered as as the cost of construction. Though capital gain should not be considered in this case but in worst of cases it should not be revenue income. Now if this is not measured as a revenue income for Peta, it cannot be measured as normal income at all. It is kind of unusual income established from the club. (CGT, 2017)

After the discussion  with the provisions of the Income Tax Law the income received by Peta is a principal receipt and cannot be measured as normal income.

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