Question 1 (15 marks)

Facts

Reliable Pty Ltd (Reliable) is a large manufacturing company that has been operating for ten years. The company is keen to retain key staff and has offered the following remuneration packages to three of its employees. Note the following scenarios for James, Louise and Matt.

(a) James is the manager and a director of Reliable and receives a salary of $130,000 and a director's fee of $25,000. From 30 April 2020 to 31 March 2021, James is also provided with unlimited use of a company car that Reliable purchased for $70,000 on 30 April 2020. During the 2020/21 FBT year, James drives 19,000 kilometres in the car. No log book is maintained by James.

(b) Louise, the Training Manager, is paid a salary of $80,000. In addition, Reliable provides Louise with a meal allowance of $100 a week, reimburses her expenditure on clothing up to $2,000 and provides her with two laptop computers which she can use as she wishes. Reliable lends $50,000 to Louise from 1 June 2020 to 31 December 2020 (interest free loan) for her personal home renovation and it fully writes off the $50,000 loan at 31 December 2020.

(c) Matt is the Sales Manager and receives a salary of $70,000. As Matt conducts much of his work from his home after business hours, Reliable pays $25,000 for the conversion of a room in Matt's home to a home office. Additionally Reliable has agreed to pay the full cost of Matt's home telephone in recognition of the use of his home phone on work matters.

Question

Discuss the income and fringe benefit tax consequences for Reliable, James, Louise and Matt. Reliable (6 marks) James (3 marks) Louise (3 marks)

Matt (3 marks)