HI6028 — Taxation Theory, Practice and Law Tutorial Questions – Week 7

Answer to question 1

An expense payment fringe benefit may arise in either of two ways:

    you (the employer) reimburse an employee for expenses they incur

    you pay a third party in satisfaction of expenses incurred by an employee.

In either case, the expenses may be business expenses or private expenses, or a combination of the two.

Since $250 is provided in the course of employment it is a reimbursement of expenses met by an employee, it is a fringe benefit.

Answer to question 2

Use the following formula to calculate the taxable value of car fringe benefits under the statutory formula method:

Taxable value = ((A × B × C) ÷ D) - E

Where:

  • A is the base value of the car = 80000
  • B is the applicable statutory percentage = 20%
  • C is the number of days in the FBT year when the car was used or available for the private use of employees = 210 days
  • D is the number of days in the FBT year = 365
  • E is the employee contribution. = 4500

Determining the base value of the car

Base value of a car you own

The base value of a car you own is:

  • the original cost price you paid (excluding registration and stamp duty)
  • the cost of any fitted non-business accessories
  • dealer delivery charges.

Car fringe benefit = (80000*20%*210)/365 - 4500

= 9205.48 - 4500

=4705.48

Answer to question 3

A fringe benefit is a form of pay for the performance of services. If the employee receives taxable fringe benefits from the employer, then they should be included in the salary in the year in which benefit is received.

1. In this question, Mason course fees was borne by his employer. Education benefit is allowable only up to $5250 Per year. Here Mason has received benefit of $12000. Hence the excess amount of benefit of $6750 received by Mason is treated as taxable fringe benefit and should be included in his salary & also to be reported on Form W-2.

2. Similarly, the market value rent for the apartment is $500 per week, whereas Mason is paying $100 per week. Hence the excess amount of $400 per week is a taxable fringe benefit and should be included in his remuneration and reported in Form W-2

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