Question

Electro Specialists Pty Ltd purchased a new vehicle for their employee Harry to use for both work and private purposes on 1November 2018.The car cost $42,000 and they paid an extra $400 to have a tow bar installed and $3,000 to have a tray cover made and installed before the vehicle was delivered. The car was provided to Harry for his use (both work and private) from that date. Harry was required to keep a logbook. This showed that 10,000 km were travelled for a twelve-week period during 1 January - 31March 2019, and of these, 4,000 km were for business purposes.

Unfortunately, in early December Harry was involved in a traffic accident, which caused a substantial amount of damage to the vehicle. The repairs cost $2,750 (which was covered by insurance) and the car was off the road for 7 days while the repairs were being done.

Other expenses incurred by Electro Specialists Pty Ltd relating to the vehicle were:

• Registration & insurance$1,200 (for 12 months), which was paid on 1November2018
• Fuel: $4,000

Harry paid out $500 for petrol and oil to the local service station in respect of the vehicle and is able to substantiate these payments. Harry also contributed to the car insurance by paying $300 directly to Electro Specialists.

Note that Electro Specialists Pty Ltd is registered for GST and that where relevant the costs mentioned above include GST.

Electro Specialists Pty Ltd has elected to use the operating cost basis under section 10 FBTAA for the vehicle.

Electro Specialists Pty Ltd also pays Telstra directly for Harrys' mobile phone expenses from 1^st November to 31 March which equates to $2,200 (inc GST) - as he uses his own mobile phone for work purposes. Harry estimates that 30% of his mobile phone use is for work purposes.

Required:

(1)Work out whether Electro Specialists Pty Ltd has an FBT liability in respect of providing the vehicle to Harry and for paying Harry's Telstra mobile phone bill.If they do, calculate how much that liability would be for the 2019 FBT year.

(2)Work out if Harry would have a reportable fringe benefit in respect of the vehicle provided to him and the mobile phone payment by Electro Specialists.