Blog

RESIDENCY ● S3-5 ITAA97 provides that income tax is payable for each year by each individual and company. ● The income tax financial year is 1 July to 30 June: ss4-10(1) and 995-1 ITAA97. ● If an individual satisfies any one of the four residency tests in s6(1) Income Tax Assessment Act 1936 (ITAA36), s/he will be an Australian resident for tax purposes for the year ended 30 June 2018 (FY2018). Otherwise, s/he will be a foreign resident for tax purposes: s995-1 ITAA97. ● Residency is assessed on a year-by-year basis and a person can be a resident for only part of the year. ORT (COPY)Under this primary common law test of residency, the taxpayer will be a resident if they ‘reside’ in Australia: s6(1)(a). this would be the case if the taxpayer ‘dwelled permanently or for a considerable period of time in a particular place’: Levene; Miller. (COPY)This is a question of fact/degree to be determined based on the taxpayer’s individual circumstances: Lysaght; Joachim; Harding. The ruling ATO TR98/17 also provides the following factors as guidance. CHOOSE ONE! ● TP IS AUS CITIZEN, travel overseas to work Arguments for DOES reside: Physical presence in Australia CHOOSE ONE OR MORE ○ (4-5months)Levene suggests that 5 months is a considerable time ○ -(6months)Commissioner suggests six months: TR98/17 ○ (1week every month)Lysaght the court found that a taxpayer who was in the UK for 1 week every month ‘resided’ there. However, these cases involve no set end to the taxpayers’ arrangements need to see if the taxpayer’s stay in Australia is for a set period. (COPY) Therefore, TP resides/not resides because ……… (COPY)Nevertheless, Joachim indicates that physical presence should not be the only determinant factor to decide her/his residency. Frequency, regularity and duration of visits to Australia CHOOSE o (Frequency,regularity)Lysaght: the taxpayer living in one jurisdiction but visiting another with frequency and regularity, i.e. the visit is not ‘casual and uncertain but… in the ordinary course of life.’ o (Duration)Levene: four or five months considered considerable time for visiting, and time abroad was temporary in nature. Therefore, TP resides/not reside because……… The purpose/intention of visits to Australian and abroad CHOOSE CHOOSE o (TREAT AUS HOME)Intention to treat Australia as home: Joachim → suggests reside o (Future expect return Aus)Presumably expected to return to Australia in the future → suggests reside. o (leave AUS bc of work related purpose)Travels overseas merely for work-related purpose shows temporary nature suggest reside: Joachim. Business or employment ties CHOOSE o Business(company/colleague/boss) is based in Australia suggests resides Lysaght o Business(company/colleague/boss) is overseas→ suggests not reside. Family ties o Joachim: Parents, siblings are in Australia–>reside o Levene: visiting relatives. Social ties and living arrangements o New Friends in overseas and/or social activities in overseas suggest not resides: Levene. Accommodation at overseas CHOOSE CHOOSE o (stay employer provided accommodation)The fact of staying at hostels or employer- provided accommodations at another place may suggest continuing association with Australia and that absence in that Australia is merely temporary: Levene; Harding. → reside o (purchase house overseas) Establishing/purchasing abodes overseas suggest not reside. Accommodation at Australia o No sell Australia home/accomodation → suggest reside Economic ties at overseas o Have Bank account, share portfolio, superannuation savings → suggest no reside. Economic ties at Australia o Have Bank account, share portfolio, superannuation savings → suggest reside. Nationality o Citizenship→ suggests reside but this is normally not decisive. Arguments for DOES NOT reside: …..bla bla bla Conclusion Evaluating all factors and the taxpayer’s circumstances, on balance, it would appear that the taxpayer DOES or DOES NOT reside in Australia under the ORT. CHOOSE RESIDE Under the ORT test, the taxpayer is an Australian resident for tax purposes for the period of date to date during FY2018. Thus, they will be taxed on ordinary/statutory income from ALL sources: ss6-5 and 6-10 ITAA97. Tax is paid at Australian resident income tax rate. OR NOT RESIDE Since the taxpayer does not satisfy the ORT test, they will foreign resident for the entire FY2018 and will be taxed on ordinary/statutory income sourced in Australia or deemed to be assessable income on some other basis unless they satisfy the other tests (domicile ,183day and superannuation test): ss6-5 and 6-10 ITAA97. Tax is paid at foreign tax rates. THE END!! ● TP IS NOT AUS CITIZEN, come to Aus to work Arguments for DOES reside: Physical presence in Australia CHOOSE ONE OR MORE ○ (4-5months)Levene suggests that 5 months is a considerable time ○ -(6months)Commissioner suggests six months: TR98/17 ○ (1week every month)Lysaght the court found that a taxpayer who was in the UK for 1 week every month ‘resided’ there. However, these cases involve no set end to the taxpayers’ arrangements need to see if the taxpayer’s stay in Australia is for a set period. (COPY)Therefore, TP resides/not reside because……….. (COPY)Nevertheless, Joachim indicates that physical presence should not be the only determinant factor to decide Laila’s residency. Frequency, regularity and duration of visits to Australia CHOOSE o (Frequency,regularity)Lysaght: the taxpayer living in one jurisdiction but visiting another with frequency and regularity, i.e. the visit is not ‘casual and uncertain but… in the ordinary course of life.’ o (Duration)Levene: four or five months considered considerable time for visiting, and time abroad was temporary in nature. (COPY)Therefore, TP resides/not reside because……….. The purpose/intention of visits to Australian and abroad CHOOSE o (TREAT AUS HOME)Intention to treat Australia as home: Joachim → suggests reside o Travel Australia merely for work related purpose –> not reside Business or employment ties CHOOSE o Business(company/colleague/boss) is based in Australia suggests resides Lysaght o Business(company/colleague/boss) is overseas→ suggests not reside. Family ties o Joachim: Parents, siblings are in Australia–>reside o Levene: visiting relatives. Social ties and living arrangements o New Friends in Australia and/or new social activities in Australia suggest resides: Levene. Accommodation at Australia CHOOSE o (stay employer provided accommodation)The fact of staying at hostels or employer- provided accommodations at another place may suggest continuing association with Australia and that absence in that Australia is merely temporary: Levene; Harding. → no reside o (purchase Australia house) Establishing/purchasing abodes in Australia suggest reside. Accommodation at own country (eg Malaysia) o No sell own country(egMalaysia) home/accommodation → suggest no reside Economic ties at own country (eg Malaysia) o Maintain/have Bank account, share portfolio, superannuation savings → suggest no reside. Economic ties at Australia o Have Bank account, share portfolio, superannuation savings → suggest reside. Arguments for DOES NOT reside: …..bla bla bla Conclusion Evaluating all factors and the taxpayer’s circumstances, on balance, it would appear that the taxpayer DOES or DOES NOT reside in Australia under the ORT. CHOOSE RESIDE Under the ORT test, the taxpayer is an Australian resident for tax purposes for the period of date to date during FY2018. Thus, they will be taxed on ordinary/statutory income from ALL sources: ss6-5 and 6-10 ITAA97. Tax is paid at Australian resident income tax rate. OR NOT RESIDE Since the taxpayer does not satisfy the ORT test, they will foreign resident for the entire FY2018 and will be taxed on ordinary/statutory income sourced in Australia or deemed to be assessable income on some other basis unless they satisfy the other tests (domicile ,183day and superannuation test): ss6-5 and 6-10 ITAA97. Tax is paid at foreign tax rates. THE END!!!! Fringe Benefit Tax (FBT) All provisions below refer to the Fringe Benefits Tax Assessment Act 1986 (FBTAA) unless otherwise specified. (COPY)Fringe benefit tax is imposed on the employer in relation to the provision of benefits to employees: s66(1) FBTAA. Step 1: Is there a fringe benefit (COPY)s136(1) FBTAA provides the definition of a fringe benefit as a benefit provided during the year of tax (1 April to 31 March: s136(1)) by an employer to an employee in respect of employment of the employee. A) BENEFIT (COPY)S136(1) provides a broad definition of benefit, including any right, privilege service or facility provided under an arrangement in relation to the performance of work. In respect of the employee’s employment (COPY)Defined in s136(1) as ‘by reason of… that employment’ (COPY)According to J&G Knowles, Starrim and Slade Bloodstock, ‘in respect of employment’ requires a ‘sufficient and material relationship’ between the employment and the provision of the benefit. CHOOSE ONE (COPY) On the facts, it is obvious that the benefit arises purely from the employment relationship as the employee would not have received the employee but for said relationship. OR (COPY) There are other relationships between the employer and the employee. Thus, we ask whether the benefit would have been received by the employee without the employment relationship: FBT: Guide for Employers (NAT 1054). On the facts, the employee would not/would have received the benefit without their capacity as an employee. Therefore, the benefit is/is not in respect of the employment Conclusion (COPY) The FBT liability of each item will be assessed on a case-by-case basis as below. ……………………………………………………………………………………………………………… 1)SALARY Expressly excluded under s136(1)(f) → no consequences 2)ALLOWANCE OR REIMBURSEMENT Step 2: Allowance or reimbursement (COPY)An allowance is determined in Roads & Traffic and TR92/15 as a predetermined amount made to cover an estimated expense which is paid regardless of whether that expense is incurred; meanwhile, reimbursements are compensation for the actual amount of expenditure incurred by an employee. CHOOSE ONE Allowance(predetermined amount) (COPY)On balance, it is more likely that the benefit received is an allowance rather than reimbursement. (COPY)Therefore, allowance is assessed as ordinary income (s6-5 ITAA97) or by specific inclusion as statutory income under s15-2 ITAA97 and is not subject to FBT. (THE END!don’t move on to following steps) OR Reimbursement(compensate actual amount) (COPY)On balance, it is more likely that that the benefit received is a reimbursement rather than allowance. Therefore, there are FBT consequences. (move on to following steps) Step 3: CHOOSE (OPTIONAL; not car fringe benefit and not for work related purpose) Reimbursement is an expense payment FB under s20b (OPTIONAL; in relation to car fringe benefit) Generally, reimbursement of the employee’s motor vehicle expenses would be qualified as an expense payment FB. However, it is exempt under s53. (OPTIONAL; for work-related purpose) Reimbursement of ____(eg. Phone bill) is an expense payment under s20. However, since the employee uses the _____(eg. phone) for work-related purpose only; therefore, if the employer provides a ‘no-private-use declaration’, the expense payment will be an exempt benefit under s20A. Besides, the taxable value of the expense payment FB will be reduced to 0 due to otherwise deductible rule under s24 as the expenses would have be deductible to the employee if s/he had incurred them himself/herself. (END HERE). Step 4: Exemption CHOOSE ONE: (COPY;satisfy exemption)The reimbursement benefit is an exempt benefit as it falls under the exemption of: CHOOSE ONE -(COPY;<300)Minor benefit under s58P which states that a benefit with a notional taxable value of less than $300 will be exempt. -(COPY) work-related item under s58X which states that a benefit that is primarily for use in the employee’s employment is exempted. Example of work-related item: A portable electronic device (see ATO ID2008/133 definition, including mobile phones, laptop computers) -(COPY;taxi single trip) single-trip taxi travel under s58Z which states that the provision of single-trip taxi journeys beginning or ending at the employee’s workplace is an exempt benefit. OR (COPY;no fall any exception)The reimbursement benefit does not fall under any of the exemptions. Step 5: Prima facie, taxable value is: $________ CHOOSE ONE: In house -(COPY)An expense payment fringe benefit is in-house where the expense relates to goods or services provided by the employer to outsiders in the ordinary course of their business: s136(1). Under s22A, Taxable Value = taxable value of the fringe benefit as if it was a property or residual fringe benefit (i.e. assume the employer did not reimburse the employee but provided the property or services directly) OR External -(COPY)An expense payment fringe benefit is external if it is not an in-house expense payment fringe benefit: s136(1). Under s23, Taxable Value = Amount of the expense or reimbursement incurred by the employer Step 6: Reduction in taxable value -(COPY)In-house FB- this doesn’t apply in this case. -(COPY)Recipient's contribution- this doesn’t apply as it is reimbursed. -(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she get deductions CHOOSE ONE ● __xx_ Expense (Deductible- fulfills positive limb) (COPY; fall under general deduction)The employee could have received deduction if s/he incurred the expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is reduced by _______. THE END! OR ● __xx__Expense (Deductible- falls under specific deduction) (COPY; falls under specific deduction) The employee could have received deduction if s/he incurred the expense himself/herself as the expense is specifically deductible under s_____ CHOOSE: Repairs- s25-10 Tax-related expenses (Eg. accountant cost to deal with tax return)-s25-5 Bad debts- s25-35 Payment to associations- s25-55 Travel between two workplaces- s25-100 (home to client/work to client) Gift to deductible gift recipient- Div30 Therefore, the taxable value of fringe benefit is reduced by _______.THE END! OR ● __xx__Expense (Not deductible- falls under negative limbs) (egwork to home) (COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not reduced and remains the same. (move on) Generally denied: - HECS (s26-20) - Relative’ travel expenses (s26-30) - Payment to related entities (s26-35) - Recreational club expenses (s26-45) - Entertainment expenses (s32-5) - Gifts or donations (s26-22) Step 7: Type 1 or type 2 Type 1: Where the employer is entitled to ITC Type 2: Where the employer is not entitled to ITC Is this a creditable acquisition (s11-5) for the employer -Acquisition (s11-10)- yes, there is acquisition -Creditable purpose (s11-15)- yes, the acquisition is provided as fringe benefit for business which is a creditable purpose -Taxable supply CHOOSE ONE - It is clear that the supply is taxable as the amount includes GST. (type1) OR -As it is not clear that the acquisition price includes GST, it is necessary to ascertain this element from the supplier’s perspective: ss9-10, 9-15, 9-20, 9-25, 23-5, 23-15, r 23.15 GST Regulations 1999, Div 38 and Div 40. (refer GST notes) -Consideration (s11-5(c)) - yes, reimbursement is treated as a consideration for an acquisition that the employer makes from the employee: s111-5, GSTR2001/3 -Registered for GST (s11-5(d))- yes, as the annual turnover of the employer is approximately $_____ which exceeds the turnover threshold of $75,000: s23-5, s23-15, s188-10 & r23.15 of the GST Regulations 1999. This shows that the employer must register for GST. CHOOSE ONE: Here, there is creditable acquisition. Therefore, it is type 1: ss5C(3) and 149A Here, there is no creditable acquisition. Therefore, it is type 2: s5C(4) Step 8: FB Taxable amount CHOOSE ONE: (COPY;TYPE 1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe Benefits 2.0802 OR (COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe Benefits 1.8868 3)OTHER EXPENSE PAYMENTS FB (NOT REIMBURSEMENT-eg. HECS payment, residential rent, accountant cost, employee’s children school fees) Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits under employee share scheme) in s136(1), and hence we can now move on. Step 3: XXX is an expense payment FB under s20A because an employer pays an expense incurred by the employee. (OPTIONAL; IF CAN ONLY USE FOR WORK RELATED,THEN EXEMPT!;) However, since the employee uses the _____(eg. phone) for work-related purpose only; therefore, if the employer provides a ‘no-private-use declaration’, the expense payment will be an exempt benefit under s20A. Besides, the taxable value of the expense payment FB will be reduced to 0 due to otherwise deductible rule under s24 as the expenses would have be deductible to the employee if s/he had incurred them himself/herself. (END HERE). Step 4: Exemption CHOOSE ONE: ● (COPY;satisfy exemption)The expense is an exempt benefit as it falls under the exemption of: CHOOSE ONE -(COPY;<300)Minor benefit under s58P which states that a benefit with a notional taxable value of less than $300 will be exempt. -(COPY) work-related item under s58X which states that a benefit that is primarily for use in the employee’s employment is exempted. Example of work-related item: A portable electronic device (see ATO ID2008/133 definition, including mobile phones, laptop computers) -(COPY;taxi single trip) single-trip taxi travel under s58Z which states that the provision of single-trip taxi journeys beginning or ending at the employee’s workplace is an exempt benefit. OR ● (COPY;no fall any exception)The expense does not fall under any of the exemptions. Step 5: Prima facie, taxable value is: $________ CHOOSE ONE: ● In house -(COPY)An expense payment fringe benefit is in-house where the expense relates to goods or services provided by the employer to outsiders in the ordinary course of their business: s136(1). Under s22A, Taxable Value = taxable value of the fringe benefit as if it was a property or residual fringe benefit (i.e. assume the employer did not reimburse the employee but provided the property or services directly) OR ● External -(COPY)An expense payment fringe benefit is external if it is not an in-house expense payment fringe benefit: s136(1). Under s23, Taxable Value = Amount of the expense or reimbursement incurred by the employer Step 6: Reduction in taxable value -(COPY)In-house FB- this doesn’t apply in this case. -(COPY)Recipient's contribution- this doesn’t apply in this case. -(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she get deductions CHOOSE ONE ● __xx_ Expense (Deductible- fulfills positive limb) (COPY; fall under general deduction)The employee could have received deduction if s/he incurred the expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is reduced by _______. (END HERE) OR ● __xx__Expense (Deductible- falls under specific deduction) (COPY; falls under specific deduction) The employee could have received deduction if s/he incurred the expense himself/herself as the expense is specifically deductible under s_____ CHOOSE: Repairs- s25-10 Tax-related expenses (Eg. accountant cost to deal with tax return)-s25-5 Bad debts- s25-35 Payment to associations- s25-55 Travel between two workplaces-s25-100 (home to client/work to client) Gift to deductible gift recipient- Div30 Therefore, the taxable value of fringe benefit is reduced by _______ THE END! OR ● __xx__Expense (Not deductible- falls under negative limbs) (COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not reduced and remains the same.(MOVE ON) Generally denied: - HECS (s26-20) - Relative’ travel expenses (s26-30) - Payment to related entities (s26-35) - Recreational club expenses (s26-45) - Entertainment expenses (s32-5) - Gifts or donations (s26-22) Step 7: Type 1 or type 2 Type 1: Where the employer is entitled to ITC Type 2: Where the employer is not entitled to ITC Is this a creditable acquisition (s11-5) for the employer (refer to GST notes) CHOOSE A/B/C: (A) It falls under input taxed supply as _____________(see the list). Thus, the entity is not entitled to ITC on such acquisition as it is not for a creditable purpose and it is not a creditable acquisition: s11-15(2)(a) and Rio Tinto. Therefore, it is type 2. Input taxed supply: - Financial supplies-s40-5 -Residential rent- s40-35(1) -Residential premises- s40-65 and s40-70 (B) It falls under GST-free supply as ___________ (see the list). Thus, it is not a creditable acquisition: s38-1.Therefore, it is type 2 GST- free supply: -Food- Subdiv 38-A -Health- Subdiv38-B -Education-Subdiv38-C -Childcare-Subdiv38-D -Exports-Subdiv38-E -Supplies of going concerns- subdiv38-J -International mail- subdiv38-Q (OPTIONAL) A creditable acquisition in relation to the supply/making of GST-free items, supplier could still be entitled to input tax credits. (C) -Acquisition (s11-10)- yes, there is acquisition -Creditable purpose (s11-15)- yes, the acquisition is provided as fringe benefit for business which is a creditable purpose -Taxable supply- CHOOSE: it is clear that the supply is taxable as the amount includes GST. OR as it is not clear that the acquisition price includes GST, it is necessary to ascertain this element from the supplier’s perspective: ss9-10, 9-15, 9-20, 9-25, 23-5, 23-15, r 23.15 GST Regulations 1999, Div 38 and Div 40. (refer GST notes) -Consideration (s11-5(c)) - yes, reimbursement is treated as a consideration for an acquisition that the employer makes from the employee: s111-5, GSTR2001/3 -Registered for GST (s11-5(d))- yes, as the annual turnover of the employer is approximately $_____ which exceeds the turnover threshold of $75,000: s23-5, s23-15, s188-10 & r23.15 of the GST Regulations 1999. This shows that the employer must register for GST. (TYPE1) CHOOSE ONE: Here, there is creditable acquisition. Therefore, it is type 1. Here, there is no creditable acquisition. Therefore, it is type 2. Step 8: FB Taxable amount CHOOSE ONE: (COPY;TYPE1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe Benefits 2.0802 OR (COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe Benefits 1.8868 4)MEAL ENTERTAINMENT EXPENSE Step 2: The benefit falls under none of the exclusions(e.g. salary, superannuation contributions, benefits under employee share scheme) in s136(1), and hence we can now move on. Step 3:-Meal entertainment fringe benefits can be captured by expense payment fringe (Div 5) benefits, property fringe benefits (Div 11) and meal entertainment fringe benefits (Div 9A). The following assumes that the employer elected for Div 9A to apply, in which case the relevant fringe benefits will be taxed under this Division and not another: ss37AA; 37AF. ● Under s37AD, a meal entertainment fringe benefit arises (regardless of whether or not the meal entertainment relates to business purposes) where an employer provides its employees with: o (a) Entertainment by way of food or drink; or ● Determining whether food or drink is provided as ‘entertainment’ will be a question of fact, and the ATO provides some guiding factors in TR97/17: o Why the food/drink is provided → On the facts, the food was provided in a social situation, e.g. lunch at restaurant (as refreshment, e.g. morning tea for employees). Therefore, it will be classified as entertainment (not entertainment). o What type of food/drink is provided → a three course meal will constitute entertainment; morning or afternoon tea, sandwiches or light meals are unlikely to constitute entertainment. o When the food/drink is provided → On the facts, the food was not/was provided during work hours, during overtime or while the employee is travelling for work purposes. Therefore, the food was likely/unlikely to constitute entertainment. o Where the food/drink is provided → food or drink provided at a hotel, restaurant or café is more likely to constitute entertainment; food or drink provided at the employer’s premises is unlikely to be entertainment. ● Although no single factor is determinative, the ATO suggests the first two factors carry the most weight. On balance, the food/drink provided is (is not) meal entertainment and is therefore (is therefore not) subject to FBT. Conclusion CHOOSE ONE (COPY) On balance,it is an meal entertainment expense FB under Div9A because …..(MOVE ON) OR (COPY)On balance,it is not an meal entertainment expense FB under Div9A because ….(THE END!) Step 4: Exemption CHOOSE ONE: -(COPY; applied 50/50 split method, benefit<$300) As stated in the facts, the employer chooses to use a 50/50 split method. Using 50/50 split method and divide the taxable value by the number of employee/associate, prima facie, the benefit to each employee/associate is _____ which is <$300; s37BA, s58P. However, the exemption is not available for taxable value calculated under 50/50 split method: s37BA, TR2017/12. OR - (COPY; applied 50/50 split method, benefit>$300) As stated in the facts, the employer chooses to use a 50/50 split method. Using 50/50 split method and divide the taxable value by the number of employee/associate, prima facie, the benefit to each employee/associate is _____ which is >$300; s37BA, s58P. Therefore, it does not fall under minor benefit exemptions: s58P and is not an exempt benefit. Besides, even if the benefit is <$300, the exemption is not available for TV calculated under 50/50 split method: s37BA, TR2017/12. OR (COPY;no fall any exception)The expense does not fall under any of the exemptions. Step 5: Prima facie, taxable value is: $________ 50/50 Split Method ● The 50/50 split method will apply automatically unless the employer elects for the 12-week register method to apply: s37B. o 50/50 split method → under s37BA, Taxable Value = 0.5 the expenses incurred by the employer during the FBT year in providing meal entertainment OR 12-week register method o Alternatively, the employer can elect for the 12-week register method to apply: s37CA. o In this case the employer must maintain a register of all meal entertainment expenditure over a representative 12-week period and determine the percentage of that expenditure which relates to the provision of meal entertainment as fringe benefits (i.e. to employees/associates, not clients), i.e. the ‘register percentage’: s37CB. o The 12-week period chosen and validity of the register are determined in accordance with ss37CC, 37CD (especially (2) & (3)). o The 12-week register method will generally provide a lower taxable value (and therefore a lower FBT liability) where less than 50% of meal entertainment expenditure is provided as fringe benefits (i.e. to employees/associates). o 12-week register method → under s37CB Taxable Value = total meal entertainment expenditure incurred in the FBT year Register percentage Step 6: Reduction in taxable value -(COPY)In-house FB- this doesn’t apply in this case. -(COPY)Recipient's contribution- this doesn’t apply in this case. -(COPY)Otherwise Deductible Rule- If the employee incurred the expense himself/herself, would he/she get deductions CHOOSE ONE ● __xx_ Expense (Deductible- fulfills positive limb) (COPY; fall under general deduction)The employee could have received deduction if s/he incurred the expense himself/herself as _____________(eg. the expense satisfies the positive limbs, incurred in gaining or producing AY and not the negative limbs). Therefore, the taxable value of fringe benefit is reduced by _______. OR ● __xx__Expense (Not deductible- falls under negative limbs) (COPY; falls under negative limb)The employee could not receive deduction if s/he incurred the expense himself/herself as the expense is ________(eg. private or domestic purpose in nature to put the TP in position to earn AY, generally denied (See list) as______ ). Therefore, the taxable value is not reduced and remains the same. Generally denied: - HECS (s26-20) - Relative’ travel expenses (s26-30) - Payment to related entities (s26-35) - Recreational club expenses (s26-45) - Entertainment expenses (s32-5) - Gifts or donations (s26-22) Step 7: Type 1 or type 2 Type 1: Where the employer is entitled to ITC Type 2: Where the employer is not entitled to ITC Is this a creditable acquisition (s11-5) for the employer (refer to GST notes) -Acquisition (s11-10)- yes, there is acquisition -Creditable purpose (s11-15)- yes, the acquisition is for a creditable purpose and not private or domestic in nature. -Taxable supply- Food is a GST-free supply and not a taxable supply under s38-2. However, s38-3(1) states that a supply is NOT GST-free under s38-2 if it is a supply of: (a) food for consumption on the premises (see s38-5) from which it is supplied, e.g. café/restaurant food. Therefore, the mean entertainment expense is not a creditable acquisition and it is type 2. Step 8: FB Taxable amount CHOOSE ONE: (COPY;TYPE 1)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 1 Fringe Benefits 2.0802 OR (COPY;TYPE 2)Fringe Benefits Taxable Amount (s5B) = Total taxable value of all Type 2 Fringe Benefits 1.8868 5) CAR FRINGE BENEFIT Step 2: The benefit falls under none of the exclusions (e.g. salary, superannuation contributions, benefits under employee share scheme) in s136(1), and hence we can now move on. Step 3: The benefit here is a car fringe benefit under s7(1) as the car is for the employee’s private use. (Optional; exempt benefit) The car provided by the employer to employee is an exempt car benefit as the car is only used for work-related travel and any private use by the employee is minor, infrequent and irregular or there is no private use. s7(1), s8(2)(END) (Optional; if overseas) Even though the employee parked his/her car at airport, where s/he or his/her associate has custody or control over the car(eg. Possessing the car key), there is still a car fringe benefit: s7(3), TD94/16 Step 4: Exemption The benefit does not fall under any of the exemptions. Step 5: Taxable value CHOOSE: (COPY; statutory formula method) The employer chooses to use statutory formula method (COPY; statutory formula method) In the absence of an election to use the cost basis method (and further information), the statutory formula method is used (s9): s10(1) Base value= cost of the car No. of days car provided as FB= ____ because days when car scheduled for ______(eg. annual repairs), car is not available for private use. Recipient’s contribution- there is no recipient’s contribution in this case Therefore, TV= $______ OR (COPY; Cost basis method) The employer chooses cost basis method. How