5.  A, who has been working for JCU since 1 July 2000, has just been retrenched and received a redundancy payment (in addition to any superannuation entitlement) totalling $120,000. How (if at all) will that $120,000 payment be taxed?

Fringe Benefits Tax

1. Consider the tax implications for both a company and an employee of that company of the following. Assume:

• the company tax rate is 27.5%; and
• the employee's existing salary is in excess of $180,000 and that the applicable (and highest) marginal tax rate above that figure is 47% inclusive of levies.

Use the table to answer the questions below. The answer to part (a) is already provided in the table.

1. The company offers the employee a pay rise of $10,000pa. What will be the after tax cost to the company and the after tax benefit to the employee of the payment?

1. What if the employee accepts the payment by way of reimbursement for GST freehome mortgage payments? Again what will be the after tax cost to the company and the after tax benefit to the employee?

1. Calculate the amount of reimbursement the employer would be prepared to pay the employee to maintain the same cost as the payment of salary? What would be the after tax benefit to the employee?

1. What would be the cost and benefit if the employee accepts the $10,000 payment in the form of FBT exempt in-house child care credits?

	Cash $	Fringe Benefit - Mortgage (GST free)	Fringe Benefit - Mortgage (same cost)	Exempt Fringe Benefit - Childcare	Superannuation (?)
Employer Outgoing	10,000	10,000
Fringe Benefits Taxable Amount Fringe benefit taxable value Grossed Up type 1 (47 +10)/ [(1-47%)*(1+10%) *47] = 2.0802 Grossed Up type 2 1/(1-47%) = 1.8868		10,000 18,868
FBT (47%)		8,867.96
Outgoing plus FBT deductions	10,000	18,867.96
Tax deduction returns (27.5%)	2,750	5,188.69
After FBT & Income Tax Cost to the company	7,250	13,679.27	7,250
Employee receives	10,000	10,000
Less 47% tax	4,700	0
Net benefit to employee	5,300	10,000

Superannuation

1. Explain the purpose and aims of the Australian Superannuation system

GST

Explain the differences between GST, income tax, and transfer duty.