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Implications of FBT and Income Tax Deductions

Question

1.a) You have been approached by a Robin Hood, a client (law firm) who employs around 80 staff and as a result of a successful year, in recognising the efforts of staff is considering holding a luncheon (and will be for the entire afternoon on the Friday of September 20th 2013 (could be either on-site or off-site). He is also considering giving gifts to his employees as well. At this point, he is considering the following options;

  • Current employees only attend;
  • Current employees and their associates attend at a cost of $180 per head (to the firm)
  • Current employees, their associates and some clients attend at a cost of $365 per head.

You are to advise Robin of any FBT implications for the three considered options as well as the implications of income tax deductions.

1. b) Errol provides his employee with the use of a car for 183 days during the FBT year ending 30th June 2013. During this time, the car travelled 16,000km. Errol purchased the car the previous year for $50,000. The employee contributed $1,000 towards the running costs of the vehicle and has provided Errol with relevant evidence.

Calculate the taxable value of the FBT for the car applying the statutory formula.

Summary

This question belongs to taxation law and discusses about any FBT implications for the three considered options in the given case as well as the implications of income tax deductions.

Total word count: 447

 

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