Question:
Discuss About The Benefits Are Actually Levied On The Particular Cars?
According to the definition that has been stated under the “Taxation ruling of MT 2027” any form of private use that an employee makes under sub-section 136 (1) that is does not leads in the generation of the taxable income then such kind of use is viewed as private use (Blakelock & King 2017). In addition to this, sub-section 136 (1) an explanation concerning the business journey that is made by an employee is accounted under the operating cost method for determining the business travel of the car made is necessarily required to be incorporated under the log book method. The log method is primarily used to determine the amount of business kilometres travelled by the car and thereby accounting the private kilometre as well for implementing the method of operating cost (Cao et al., 2015). From the following case study, it is evidently understood that a total of 50,000 kilometres was travelled by Charlie that formed the part of work. At the time of arriving at the fringe benefit value of the car that was used by Charlie it is vital to take into the considerations the operational method of costing in conformity with the sub-section 136 (1) of the Miscellaneous Taxatin.
The determination of the fringe benefits of those cars which Charlie used requires the valuation which needs to be used in obedience with the sub-section 136 (1) of the Miscellaneous Taxation Rulings of 2027 (Christie 2015). According to the paragraph 3 of the Miscellaneous Taxation Ruling it is clear that the occupational functions of the particular cars have to be encompassed in the log book or any particular type of file due to the business kilometres that have been travelled according to the operating cost method. Based on the taxation rulings of MT 2027 with reference to sub-section 136 (1) a specific kind of use made by the employees that is not completely related to the procedure of production of taxable income can be thought of as individual use (Fleurbaey & Maniquet 2015). According to the case study it is evident that the car which was used by Charlie was due to work purposes for a distance of about 50 kilometres (Bickley, 2012).
The use of the car by Charlie shows that the business is representative of the use of the business in connection to the employee’s income, which is taxable. As a result, this is bound to lead to the levy of the FBT. The use of the car by Charlie was during his time as an worker of Homes Pty Ltd. This use was also due to the business purposes. This is evident from the case study provided (McLachlan, 2013).
An important question surrounding the case study is the determination of both the private and the business use of the car. Hence, whether the car that was used by the employee was primarily engaged in the process of generating the taxable income of the employee. The sub section 136 (1) clearly states that the utilisation of the cars by the employees which are provided by the employer and used throughout the duration of the occupation can be considered as business use for the FBT (Fry, 2017). This is only in cases, which are related to the activities of employment. Thus, it can be said that the levying of those taxes are applicable (Kaldor, 2014). Moreover, it further follows that the use made of car made by the employee that provided the car for the business that was executed by the employee or during the course of the employment might be regarded as the business use of the car for the purpose of fringe benefit tax. In addition to this, use of car made the employee in the due phase of business that was executed by the employee might identically be viewed as the business use of the car.
The prevalent situation of Charlie and Homes states that Charlie use the car in discharge of his employment activities Homes and gave him the car with the purpose of executing the business activities of his employment. It can be stated that the car used by Charlie would be treated as the business use since it was engaged in the production of chargeable revenue of the employee and this will lead to Fringe Benefit Tax.
The test that is used in the determination of the business use of the car as well as the private use for the purpose of FBT is very much identical to that has been defined in ascertaining the expenses incurred are allowable as deductions under section section 51 of the Income Tax Assessment Act 1997 (Gordon & Keuschnigg 2017). Several such expenditure incurred by Charlie in the present study can be regarded for income tax deductions. In determining the deductibility of the expenditure incurred by Charlie, it is vital to distinguish the expenditure for both private and business purpose. The amount of expenses that is incurred by Charlie in the present scenario can be considered for claiming income tax deduction.
In the determination of whether the car expenses are acceptable to be subtracted under the “section 51 of the ITAA 1997”, there are convinced facts that have been gained from the particular case study, which can be considered as permissible deductions for the Income tax purposes (Ismer & Jescheck, 2017).
In respect of the contemporary circumstance of Charlie and Homes, the guiding principles of Miscellaneous Taxation Rulings of 2027 evidently puts forward the principles associated for the purpose of income tax (Kabinga 2015). It can be stated that the ruling is consistently in conformity with the necessary obligations of Sub-division F of Division 3 of the “Income Tax Assessment Act 1997” for determining the expenditure on car by Charlie and Homes are considered for income tax deductions (Lang, 2014).
Traveling to workplace is basically considered as a pre-requisite linked to the assembly of the reckonable income during the time of definite earning of the income. Depending on the Lunney and Hayley v FCT (1958) the debated viewpoint in the particular case confirmed the situations, which were related to the travel from an individual’s home to the regular place of his service will be measured as a private form of travel only (McDaniel 2017). In the Charlie and Homes Case Study scenario, the expenses incurred can be thought of as allowable deductions that comply with the Sub-division F of Division 3stated in Miscellaneous Taxation Rulings of 2027, which are related to the issues of income tax (Barkoczy, 2016).
As a consequence, it can be stated that the distance in kilometres which were essentially journeyed by Charlie, would be considered to be strictly private. Charlie also could not alter the outcomes of these operations in any way owing to the use of the car. The incurred cost by the barrister, during the time of travel amid his residence to the place of his work would be thought of as an expense according to the “Newsom v Robertson (1952)”.
The travel in which Charlie was indulged would be thought of as travel related in discharge of the employment activities. This is due to the fact that travel comprised the chief part of the individual’s service and this is clear from the “Simon in Taylor v Provan (1975)”. It is evident that the use of the car by Charlie was partly for the personal use and partially for the purpose of employment (Bickley, 2012). The travel to one’s place of residence by any employee concerned might be considered as a business travel simply because the employment nature is nomadic (Saad, 2014).
Apart from this, the obligations of employment of Charlie needed him to perform the necessary responsibilities of service in those areas of work, which were of multiple numbers. It is not improbable for Charlie relating to the entitlement of tax deductions concerned to work and concerned to the expense of petrol as well as the repairs as it was used in the attainment of the assessable income based on the FBT Act 1986 (Kaldor 2014).
A car parking Fringe benefit may originate given the fact that the company offers the facilities of car parking to the worker and the below listed standards are met:
The provided case study evidently shows that the car was parked by Charlie in his garage, which was controlled by him. The car was basically parked by him in a safe place for which he was paid $200 every week. The car was utilised by Charlie with the objective of travelling between his home and the place of his employment on a regular basis. It can be said this can lead to fringe benefits for Charlie and Homes can be entitled to claim the permissible income deductions for the charges of parking. This can be claimed on behalf of the employee on the other hand.
As defined under the Fringe Benefit Tax Act 1986, provision relating to the entertainment consists of the entertainment in the form of drink or recreation, travelling or accommodation having an association with entertainment (McLachlan, 2013). From the following case study of Charlie it can be stated that the Charlie suffered a minor accidents and this prevented him using the vehicle for a time of two weeks. The incident unfortunately occurred before the wedding of Charlie and as a result of this Shine Homes decided to hire a car for that period and so that Charlie can go for his honeymoon. Additionally, the accommodation cost of Charlie was paid by Shine Homes.
The discussed instances are in conformity with the provision of the “Fringe Benefit Tax Act 1986” and this will results in tax liability for Shine Homes. According to the provision of the “Fringe Benefit Tax Act 1986” a tax liability will occur for providing an employee with a holiday or a weekend trip (Miller & Oats 2016). In compliance with the current situation of Charlie, it is found that Shine Homes paid the cost accommodation and Charlie on the other hand cannot claim for deductions. However, Shine Homes will entitlement for claiming deductions. On the contrary, Charlie under such circumstances would be required to declare such kind of allowance in his taxable return in the form of income. The taxation rulings of TR 94/25 is applied on the employers and they are liable to be taxed in conformity with the section 5 of the Fringe Benefit Tax Act 1986.
It is quite evident that the cost of accommodations is paid by Shine Homes. This was only claimed as allowable deductions. The case study helps in inferring the fact that the Shine Homes Pty Ltd incurred a fringe benefit expense for Charlie bearing the cost of honeymoon accommodations and according to the “Fringe Benefit Tax Act 1986”, resulted in the tax liability. However, Charlie shall be under the obligation of declaration of the nature of these types of grant in the income tax returns.
The “Subsection 51 (1) of the ITAA 1936” is implemented to entitlement of benefit for the taxpayers who are basically employees (Saad, 2014). The liability related to the FBT for the Shine Homes can be considered in the regulation of the Commonwealth. The FBT includes that sum of value, which is allocated to the numerous FBTs in the ordinary case. This is in compliance with the “Tubemakers of Australia Ltd v. FC of T”. Charlie is provided with these by the Shine Homes. The expenses, which Shine Homes incurred in deriving the taxable revenue, would be viewed as a deductable expense. This is based on the subsection 51 (1) of the ITAA 1997.
From the given situation it can be evidently put forward that numerous expenses were occurred by Shine Homes. The spending’s were related to honeymoon accommodation, car hire cost, parking fees and these expenditure are incurred with the objective of gaining and producing the taxable income. In conformity with the subsection 51 (1) of the ITAA 1997 the expenditure incurred by Shine Homes would be considered as allowable deductions for the income tax purpose. The reason behind claiming allowable expenditure is that the expenses were incurred in gaining or deriving the taxable income and were incurred in the process of carrying of a business activities of the taxpayers.
Conclusion:
On arriving at the conclusion it can be stated from the current case study that expenses related to fringe benefit will be considered for taxation purpose under the provision of FBT Act 1986. The study on arriving at the conclusion has taken account of the relevant legislation and laws to determine the fringe benefit. In the form of a final statement it can be said that the expenditures related to the fringe benefits will be kept in mind for the purposes related to tax according to the FBT Act 1986. The car which Charlie used, is to be regarded as the business utility useful for the gain in income of taxable nature which actually attracts the FBT.
References:
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Barkoczy, S. (2016). Foundations of Taxation Law 2016. OUP Catalogue.
Bickley, J. M. (2012). Employee stock options: tax treatment and tax issues.
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