Income Tax and Fringe Benefits Tax (FBT) Analysis for Joanne Taylor’s Remuneration Package – 2018-19 FBT Year

Introduction

In the realm of income taxation, Fringe Benefits Tax (FBT) plays a crucial role in determining the tax consequences of various fringe benefits provided to employees. Joanne Taylor, an Actuary consultant at MNP Ltd, received a diverse range of benefits as part of her remuneration package during the 2018-19 FBT year. This essay delves into the income tax and FBT implications of the benefits received by Joanne Taylor, supported by relevant calculations and legislative references.

Salary and Housing Loan

Joanne received a salary of $80,000 during the FBT year. Her salary is subject to regular income tax as per the Income Tax Assessment Act. In addition, Joanne received a low-interest housing loan of $100,000 for her principal residence, with an average balance of $95,000 during the year. As this housing loan is provided at concessional interest rates, it falls under the FBT regime. The taxable value of this benefit is calculated as the difference between the benchmark interest rate set by the Australian Taxation Office (ATO) and the actual interest rate applied. The FBT is then calculated on this taxable value. Relevant legislation: Section 20 of Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Car Benefits

Joanne received two cars as part of her remuneration package – a Volvo and a Ford. For the Volvo car, she received an interest-free loan of $20,000, with a total purchase cost of $40,000. The taxable value of this benefit is calculated based on the statutory formula method, which takes into account the car’s cost, its business use percentage, and the distance travelled for both business and private purposes. Similarly, for the Ford car, the taxable value is determined using the same method, considering the car’s value, private usage, and the contribution towards its running costs. Relevant legislation: Division 2 of FBTAA.

Laptop Computer and Mobile Phone

Joanne used a laptop computer and mobile phone for her work, with 80% of their usage being business-related. The taxable value of these benefits is calculated as the percentage of personal use multiplied by the cost of the items. However, as the usage is predominantly for business purposes, the FBT impact is minimal. Relevant legislation: Section 22 of FBTAA.

Travel Allowance and Professional Association Membership: The travel allowance of $7,000 provided to Joanne is exempt from FBT if it meets certain conditions, such as being spent on accommodation, meals, or incidental expenses during business travel. The professional Actuary Association membership fee of $950 is also exempt from FBT as it relates to her professional development. Relevant legislation: Section 58X and Section 58Z of FBTAA.

Corporate Credit Card Expenses

Joanne was entitled to use the company’s corporate credit card for private expenses, which amounted to $2,300. These expenses are considered a fringe benefit and are subject to FBT. The taxable value is determined by the actual expenditure incurred on private expenses. Relevant legislation: Section 21 of FBTAA.

Conclusion

Joanne Taylor’s remuneration package for the 2018-19 FBT year encompassed various components that have different income tax and FBT implications. The FBT calculations are based on the taxable value of each fringe benefit, determined by the specific method prescribed by the FBT legislation. While some benefits may be exempt from FBT, others are subject to this tax. Understanding these implications is crucial for both Joanne Taylor and MNP Ltd to ensure compliance with relevant tax laws and regulations.