Provide Fringe Benefits - Case Study Example

Name: Tutor: Course: Institution: Date: Question one: advice to Chatswood Pty Ltd on Fringe benefits tax liability Fringe benefit tax describes the additional compensation that employees receive in addition to their salary. Fringe benefits are considered to have been provided to the employees if the employer has made the payments for the purposes of entertainment; festival celebrations; gifts; use of club facilities; provision of hospitality services; maintenance of guest house; conference; employee welfare; use of health and sports club; sales promotion and publicity; tour and travel, conveyance including any foreign travel expenses; hotel boarding and lodging; running, repair, and maintenance of motor cars; running, repair and maintenance of aircraft; consumption of fuel other than industrial fuel; telephone expenses; employees children scholarship. Chatswood Pty Ltd motor vehicle unavailability can affect the employee’s Fringe benefits tax if the vehicle that must be garaged is on the company premises or leased premises. If the employer withdraws the control of the vehicle from the hands of the employees and ensures that the vehicle is not made available to employees for private use or the vehicle that is being repaired does not have employees access for a period of 24 hours. However, motor vehicle unavailability cannot be claimed if the vehicle is in safe custody as well as in the long term car parking. It is worthwhile to note that regardless of the unavailability the required kilometers by the end of the fringed benefit tax must be reached. The following is the formula used to determine the employee liability FBT liability = Purchase Price × Statutory Rate × Gross Up × 46.5% × Number of days that the vehicle was available for use 365 The value which is taxable can be established from various series of the evaluation rules. Taxable value must be allocated from the fringe benefits except the excluded fringe benefit that is related to the relevant employees. Therefore, this is the individual fringe benefits amount where the benefits are provided to the associates of employees in respect to their employment. The value is allocated to the employee but not the associate. The Chatswood Pty Ltd company management should be aware that If the fringe benefits are provided to an employee with total taxable value of over $1000 the gross up taxable must be reported. The report is referred to as fringe benefits report. All the benefits must be allocated to the relevant staff including the capping thresholds. However, there are exemptions to pay the fringe benefit tax. There are a number of benefits that are exempt from the fringe benefits tax. These fringe benefits are not reported on the payment summaries. The excluded benefits include the following entertainment inform of food and drink, as well as benefits associated with entertainment, such as accommodation and travel. Car parking fringe benefits, apart from eligible car parking expense payments. The hired and leased entertainment facilities, such as corporate boxes as well as benefits that are provided to employees in hardship and remote areas commonly referred to as hardship allowances. Chatswood Pty Ltd must report the fringe benefits accordingly; formula for calculating the reportable fringe benefits is as follows. Employee's individual fringe benefits amount x gross-up rate. The tax laws states that sufficient records must kept in order to enable the assessment of the fringe benefits tax. The records must be in English language. In addition is the records are in electronic format they must be kept in a format that can be easily accessed as well as converted to English. The records must be kept for a period of five years. Specific records must be kept in cases in order to take advantage of the exemptions as well as the concessions to reduce the fringe benefit tax needed to be paid. Examples of documents that are required to be retained for five years include invoices and receipts, declarations, lease documents, bills of sales, copies of logbooks, travel diaries, odometer records. Fleet management records and odometer records incase where the benefits of the vehicle fringe benefit tax is valued under the operating cost method. Some of the exemptions and concessions require the company to obtain the documented evidence of expenditure by from the employee. The original invoices as well as receipts must be produced by the employee showing the date of that the transaction took place, the items that were bought as well as the name of the supplier. It is the obligation of the Chatswood Pty Ltd to note that Fringe benefit tax must be registered once the organizational management agrees that the company has to pay the fringe benefit tax. In order to register fringe benefit tax a request has to be completed and submitted to the relevant tax office. Once the application is accepted by the tax office information is provided to assist the company lodge the returns. I addition the tax office notifies the changes to any rates needed to calculate the fringe benefit tax. The number used to pay fringe benefit tax is similar to the tax number. The annual fringe benefit tax must be submitted to the tax office annually. These can be sent electronically. Question two: advice to peter on Capital gains tax Capital gains tax which is denoted as CGT refers to the tax that is charged on capital gains as well as the profit that is realized after the sale of the non inventory asset which had been purchased at a lower price. Capital gains are realized as a result of the sale of property, stocks, precious metals and stock. Not all the countries across the globe implement capital gain tax. Furthermore, those countries that implement the capital gain tax they have distinct tax rates for corporations and individual. Taxes are charged by the government over the dividends, transactions and capital gains in the stock market. In some other cases fiscal obligations vary from one jurisdiction to another since taxation is incorporated in stock price in different taxes that firms pay to the government. In Australia capital gain tax is applicable when the profit is made on capital disposal that is acquired after 20th September, 1985. The capital assets are described in legislation as and kind of property. There are some property that are exempt to capital gain tax, the most common property that is exempt to capital gain tax are the residential houses. The total gains of a particular tax payer are the total profit that is obtained from the sale of assets. The total can be obtained after subtracting the cost base from the capital. Once the total gains have been calculated, the net gain can be calculated through applying the capital losses; thereafter the capital gain tax is applied. After the capital gain is calculated the tax payer who sold of the property includes the net capital in the assessed income after the tax return is lodged. Peter as a taxpayer is liable to capital gain tax if his /her capital gains are more than capital loss during a financial year. Properties are subject to capital gains when they are sold. There is one big misconceptions with the capital gains tax, many taxpayers believe that capital gain tax is payable at the marginal rate. This is not the correct fact. The correct fact is that capital gain that is made is added to other income to give rise to taxable income thereafter the marginal income is taxed. Another major misconception concerning capital gains tax is that if the loss is incurred, the loss can assist in reducing the taxable income. This is very wrong. The truth is a capital loss is only offset if the capital gain is against it. During the process of determining capital loss as well as gain it is very essential to maintain all the records that relates to the sale as well as purchase of property including all the expenses that are associated in the process of sales and purchases since they may be part and parcel of the cost base therefore reducing the capital gains. There are two critical factors that should be noted, these factors are one, and the due date of the acquisition as well as sales is the same as that one of sales and purchases contract but not the date of settlement. Two, for a tax payer to be eligible for 50% discount him/she should own the property for one whole year with exemption of sales and purchases date. There are several capital gain tax events. Capital gain tax events refer to different types of transactions that result to capital loss or capital gain. Some of these transactions occur often while others occur rarely. The following are the situations under which the capital gain tax happens. When the assets owned by a taxpayer is destroyed or lost; when the shares owned by the taxpayer are canceled, redeemed or surrendered; when a taxpayer grants someone an option to purchase an asset that is his/her own. When the tax payer disposes a depreciating asset that was used for private purposes and when the taxpayer ceases to be an Australian resident. There are many capital gain assets that are recognizable include real estate, shares in a company, personal assets and unit trusts. Other capital gain assets that are not well understood include contractual rights and goodwill. There are two main methods used to calculate capital gain. These methods are indexation method and discount method. The indexation method can be used to calculate capital gain if the capital gains tax is associated to an asset that was acquired the period before 11.45 Am on September 21, 1999; In addition, when the asset has been owned by the tax payer for a period of more than 12 months. Discount method can be used to calculate capital gain tax if the taxpayer is an individual, trust or superannuation entity. Discount method can also be used when the capital gain tax event occurs and is related to the asset owned by the tax payer. Work cited Commonwealth of Australia. Australian government: Australian taxation office. Introduction to capital gain tax. 2010. Retrieved May 24, 2011 from < http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/20427.htm&pa ge=1&H1> Commonwealth of Australia. Australian government: Australian taxation office. What to do if you provide fringe benefits. 2010. Retrieved may 24, 2011 from Read More