QUESTION 1 ANSWER BOTH PARTS (20 marks) Sandra Higgins is the marketing manager of Didget Finance Pty Ltd, a Sydney-based mortgage broking firm. She has sole use of a company-owned car. The car originally cost the company $58,300 (including GST) when it was provided to her on 1 March 2015. Sandra did not contribute to the running costs. As the firm had insufficient space on its premises to park the car outside office hours, Sandra was allowed to garage it at her home each night from the date of acquisition. During the FBT year ended 31 March 2019, the car was at the smash repairers for 12 days whilst the damage from an accident was being repaired. The company uses the statutory method for FBT purposes. During the FBT year ended 31 March 2019, Sandra also received the following benefits as part of her salary package: 1) Entertainment allowance $3,000 (GST Inclusive) p.a. 2) Sandra is required to travel to various locations to visit prospective clients. Her employer requires her to be contactable at all times and has provided her with a mobile phone for this purpose and pays all its related costs, including calls (on which GST has been paid). Sandra estimates that 80 per cent of the calls she makes are for private purposes. 3) A low interest loan of $100,000 provided to Sandra on 1 July 2018. The interest rate on the loan was 3.8%. Sandra used the money to finance extensive renovations to her principal place of residence. 4) Other benefits from her salary package entitle Sandra to have subscriptions to professional magazines ($350 pa), professional association membership subscription ($210), and the use of airport lounge membership ($460). 5) In February 2019, Sandra attended a two-day marketing conference at the Splinters Guest Resort in the Hunter Valley. She spent $750 on travel, accommodation and conference registration. Didget Finance Pty Ltd reimbursed her for the expenditure. Note: Didget Finance Pty Ltd is registered for GST REQUIRED: a) Explain what components of the remuneration package provided by Didget Finance Pty Ltd constitute a fringe benefit, and if so what type of fringe benefit. You must also explain why a component is or is not a fringe benefit. (10 marks) b) Where relevant, calculate the fringe benefits tax payable in respect of the particular remuneration component for the FBT year ended 31 March 2019. (Please show all workings). (10 marks) FRINGE BENEFITS TAX The statutory rates for the different periods are: Statutory Rate New contracts entered into after 7.30pm on 10 May 2011 Existing Contracts Annualized number of whole kilometres travelled during FBT year From 10 May 2011 From 1 April 2012 From 1 April 2013 From 1 April 2014 0 14,999 0.26 0.20 0.20 0.20 0.20 15,000 24,999 0.20 0.20 0.20 0.20 0.20 25,000 40,000 0.11 0.14 0.17 0.20 0.20 Over 40,000 0.07 0.10 0.19 0.17 0.20 FRINGE BENEFITS TAX RATE for the FBT year ending 31 March 2019: 47% GROSS-UP RATES FOR FRINGE BENEFITS TAX for the FBT year ending 31 March 2019: Type 1: 2.0802 Type 2: 1.8868 STATUTORY/ BENCHMARK INTEREST RATE for the FBT year ending 31 March 2019: 5.20% QUESTION 1 ANSWER BOTH PARTS (20 marks) Sandra Higgins is the marketing manager of Didget Finance Pty Ltd, a Sydney-based mortgage broking firm. She has sole use of a company-owned car. The car originally cost the company $58,300 (including GST) when it was provided to her on 1 March 2015. Sandra did not contribute to the running costs. As the firm had insufficient space on its premises to park the car outside office hours, Sandra was allowed to garage it at her home each night from the date of acquisition. During the FBT year ended 31 March 2019, the car was at the smash repairers for 12 days whilst the damage from an accident was being repaired. The company uses the statutory method for FBT purposes. During the FBT year ended 31 March 2019, Sandra also received the following benefits as part of her salary package: 1) Entertainment allowance $3,000 (GST Inclusive) p.a. 2) Sandra is required to travel to various locations to visit prospective clients. Her employer requires her to be contactable at all times and has provided her with a mobile phone for this purpose and pays all its related costs, including calls (on which GST has been paid). Sandra estimates that 80 per cent of the calls she makes are for private purposes. 3) A low interest loan of $100,000 provided to Sandra on 1 July 2018. The interest rate on the loan was 3.8%. Sandra used the money to finance extensive renovations to her principal place of residence. 4) Other benefits from her salary package entitle Sandra to have subscriptions to professional magazines ($350 pa), professional association membership subscription ($210), and the use of airport lounge membership ($460). 5) In February 2019, Sandra attended a two-day marketing conference at the Splinters Guest Resort in the Hunter Valley. She spent $750 on travel, accommodation and conference registration. Didget Finance Pty Ltd reimbursed her for the expenditure. Note: Didget Finance Pty Ltd is registered for GST REQUIRED: a) Explain what components of the remuneration package provided by Didget Finance Pty Ltd constitute a fringe benefit, and if so what type of fringe benefit. You must also explain why a component is or is not a fringe benefit. (10 marks) b) Where relevant, calculate the fringe benefits tax payable in respect of the particular remuneration component for the FBT year ended 31 March 2019. (Please show all workings). (10 marks) FRINGE BENEFITS TAX The statutory rates for the different periods are: Statutory Rate New contracts entered into after 7.30pm on 10 May 2011 Existing Contracts Annualized number of whole kilometres travelled during FBT year From 10 May 2011 From 1 April 2012 From 1 April 2013 From 1 April 2014 0 14,999 0.26 0.20 0.20 0.20 0.20 15,000 24,999 0.20 0.20 0.20 0.20 0.20 25,000 40,000 0.11 0.14 0.17 0.20 0.20 Over 40,000 0.07 0.10 0.19 0.17 0.20 FRINGE BENEFITS TAX RATE for the FBT year ending 31 March 2019: 47% GROSS-UP RATES FOR FRINGE BENEFITS TAX for the FBT year ending 31 March 2019: Type 1: 2.0802 Type 2: 1.8868 STATUTORY/ BENCHMARK INTEREST RATE for the FBT year ending 31 March 2019: 5.20%