Question 1

Which of the following is not a stated reason why the fringe benefits tax was introduced into Australia?

Accepted Answer

The primary reasons for introducing the fringe benefits tax in Australia were to address technical complexities, administrative difficulties, and non-compliance issues related to the taxation of fringe benefits, not explicitly to raise extra revenue for the government.

Question 2

Which of the following statements is true for the way in which any fringe benefits tax liability is calculated?

Accepted Answer

The correct formula for calculating fringe benefits tax (FBT) liability is the taxable value of the benefit multiplied by the gross-up factor, and then multiplied by the FBT rate. This accounts for the gross-up factor, which adjusts for the benefits being provided on a pre-tax basis.

Question 3

Which if the following is subject to FBT?

Accepted Answer

FBT, or Fringe Benefits Tax, is a tax applied to most non-cash benefits that an employer provides to an employee. The provision of a car by an employer to an employee for private use is a classic example of a fringe benefit subject to FBT. Superannuation contributions and employment termination payments are not considered fringe benefits and are subject to different tax treatments. The provision of a portable electronic device for primarily employment use is generally exempt from FBT under certain conditions.

Question 4

Which of the following would not involve an application of the otherwise deductible rule?

Accepted Answer

The otherwise deductible rule applies when an expense, if paid by the employee, would be deductible under tax law. Choices A, B, and C involve expenses that could be deductible if the employee had paid them directly because they are related to income production or work. Choice D, the payment of an employee's children's school fees, does not involve an expense that would be deductible if paid by the employee, as personal or family expenses like children's education are not deductible for tax purposes.

Question 5

Which of the following would not involve a fringe benefit?

Accepted Answer

An allowance for using a personal car for work purposes is a direct payment and not a fringe benefit, which typically involves non-cash benefits.

Question 6

Which of the following is not an obligation of either the employer or employee in terms of the reporting and payment obligations of any fringe benefits tax liability?

Accepted Answer

Employees must report the fringe benefit amount on their tax return if it exceeds $2000, making option B incorrect.

Question 7

Hot Wheels Racing Pty Ltd provided the following benefits to employees during the FBT year ended 31 March 2020: A car fringe benefit (GST included) with a taxable value of $6,500 and an expense payment fringe benefit (no GST) with a taxable value of $1,200. What is Hot Wheels Racing Pty Ltd's FBT liability for the year ended 31 March 2020?

Accepted Answer

The FBT liability is calculated by grossing up the taxable value of the benefits and applying the FBT rate. The car fringe benefit is grossed up using the Type 1 gross-up rate (2.0802) and the expense payment fringe benefit using the Type 2 gross-up rate (1.8868). The FBT rate for the year ended 31 March 2020 is 47%. The calculation is: ($6,500 x 2.0802 + $1,200 x 1.8868) x 47% = $7,418.95.

Question 8

An employer purchases a car on 1 October 2019 for $35,000 and provides that car to an employee to use for private purposes for the rest of the FBT year. If the employee reimbursed the employer $2,000 for using this car, what would be the taxable value of this car fringe benefit provided under the statutory formula method?

Accepted Answer

The statutory formula method calculates the taxable value as 20% of the car's base value minus any employee contributions. Here, 20% of $35,000 is $7,000. After subtracting the $2,000 reimbursement, the taxable value is $5,000.

Question 9

An employer provided an interest-free loan of $50,000 to an employee on 1 April 2019. The employee used this loan 50% for private purposes and the remaining 50% was used to purchase shares in companies that pay dividends. What is the taxable value of this loan fringe benefit?

Accepted Answer

The answer of An employer provided an interest-free loan of...

Question 10

An employer purchases a car on 1 May 2019 for $33,000 and provides that car to an employee to use for private purposes for the rest of the FBT year. A log book was maintained by the employee, which showed their work related use of the motor car to be 30%. If the employee reimbursed the employer $3,000 for using this car and the total operating costs for this car (including any deemed depreciation and interest) were $16,000, what would be the taxable value of this car fringe benefit provided under the operating costs method?

Accepted Answer

The taxable value under the operating cost method is calculated by taking the total operating costs of the car ($16,000), multiplying by the percentage of private use (100% - 30% = 70%), and then subtracting any employee contributions ($3,000). This results in a taxable value of $8,200 ($16,000 * 70% - $3,000).

Question 11

Furniture Kings Ltd manufacture various furniture items and to reward employees they allow employees to purchase up to three furniture items per year at 50% of the selling price. Calculate the company's FBT liability if Ann purchases 3 items @ $500 each during the FBT year ended 31 March 2020?

Accepted Answer

The FBT (Fringe Benefits Tax) liability is calculated on the benefit provided to the employee, which in this case is the discount on the furniture. Ann purchases 3 items at $500 each, totaling $1,500. Since she gets a 50% discount, the actual benefit is $750 ($1,500 * 50%). The FBT rate for the year ended 31 March 2020 is 47%. Therefore, the FBT liability is $750 * 47% = $352.50. However, this calculation does not directly lead to any of the provided options, suggesting a misunderstanding in the calculation process or a mistake in the initial explanation. Given the options and the typical approach to calculating FBT, none directly align with the standard calculation provided, indicating a need for clarification or correction in the approach or the options provided.

Question 12

Bells Pty Ltd sells telephone systems to the public and on occasion they sell off some of their old furniture to employees at 10% of its resale value. For the FBT year ended 31 March 2020, Bells Pty Ltd sold 10 items of furniture that a resale value of $5,000 in total. These items were sold to staff for $500. What is the taxable value of the sale of this furniture to employees?

Accepted Answer

The taxable value of the sale of this furniture to employees is the difference between the resale value ($5,000) and the amount paid by the employees ($500), which is $4,500.

Question 13

As part of Yan's salary package, she parked her car in her employer's business premises for $4 per day during the FBT year ending 31 March 2020. Yan worked 225 days during this FBT year. The lowest fee charged by the commercial car park that is located within one km of Yan's company premises was $14 on 1 April 2019 and $18 on 31 March 2020.
What is the taxable value if the company elects to use the average cost method?

Accepted Answer

The taxable value using the average cost method is calculated by taking the average of the lowest fee charged by the commercial car park at the start and end of the FBT year ($14 on 1 April 2019 and $18 on 31 March 2020), which is ($14 + $18) / 2 = $16 per day. Then, multiply this average daily cost by the number of days Yan worked during the FBT year (225 days). So, the taxable value is $16 * 225 = $3,600. However, since Yan paid $4 per day for parking, the actual benefit is the difference between the average commercial rate and what Yan paid: ($16 - $4) * 225 = $12 * 225 = $2,700.

Question 14

Which of the following statements about the way FBT liability is calculated is incorrect?

Accepted Answer

The answer of Which of the following statements about the...

Question 15

Which one of the following is not correct with respect to the reportable fringe benefit amount?

Accepted Answer

The reportable fringe benefit amount does have implications on an employee's taxation and other liabilities, such as affecting entitlements to government benefits, tax offsets, and the Medicare levy surcharge, contrary to the claim that it has no effect at all.

Question 16

If BZ Engineers provides its two employees with $460 worth of protective clothing (each), for no cost to each employee, for use only at work, during the FBT year ended 31 March 2020, what would the taxable value of this external property fringe benefit be?

Accepted Answer

Protective clothing provided to employees for use at work is generally exempt from Fringe Benefits Tax (FBT) if it is primarily for the employees' safety. Since the protective clothing is for use only at work and assuming it is necessary for the employees' safety, the taxable value would be nil.

Question 17

Which of the following benefits provided by an employer to an employee would be exempt fringe benefits?

Accepted Answer

Membership or subscriptions to professional journals are typically considered work-related and can be exempt from fringe benefits tax as they are directly related to the employee's job.

Question 18

What would be the FBT liability payable by an employer if 80% of a $20,000 loan made by an employer to an employee in respect to the employment of the employee, is forgiven?

Accepted Answer

The answer of What would be the FBT liability payable...

Question 19

An employer provides a $30,000 loan to an employee, in respect to their employment, at an interest rate of only 2%. All of the loan monies are used for private purposes. What would be the taxable amount of this loan fringe benefit?

Accepted Answer

The taxable amount of the loan fringe benefit is calculated by determining the difference between the interest that would have been payable at the statutory rate (e.g., 5.37% for the 2023-24 FBT year) and the interest actually paid. The statutory interest on $30,000 at 5.37% is $1,611, and the interest paid at 2% is $600. The difference, $1,011, is the taxable amount.

Question 20

ABC Computers reimburses the telephone expenses ($120 per month), for each month of the FBT year ended 31 March 2020, of an employee. The employee has kept records showing that 70% of her telephone expenses relate to work calls. What is the taxable of this expense payment fringe benefit provided by ABC Computers?

Accepted Answer

The taxable value of the expense payment fringe benefit is calculated by subtracting the work-related portion (70% of $120 per month) from the total expense ($120 per month) for each month of the FBT year (12 months). The work-related portion is $84 per month (70% of $120), so the personal portion is $36 per month ($120 - $84). Over 12 months, this amounts to $432 ($36 x 12).

Quiz 5: Fringe Benefits Tax