FBT Calculation And Income Tax Consequences Of Selling Land In Australia

FBT Calculation

Fringe Benefit Taxis considered a separate tax from tax on income. It is calculated annually on the benefit gained by the employee. An employer assess their annual FBT liability for the FBT year which begins from 1^st of April to 31^st of march and then lodge an FBT return. In this case, Lucy is the proprietor and one of the director at Clothes r Us Pty Ltd(CRU) which is a privately owned business which imports children’s clothes while also acting as a wholesaler. She is the biggest shareholder of the company owning 90% of the total shares.  

CRU leased a car on 1^st of May 2019at a cost of $85,000 which includes GST. The consumption of fuel of the car does not exceed 7 liters per 100 kilometers travelled. Total lease payment for the first year is $3,200. The car is parked at Lucy’s home most of the night as there are no parking spaces secured in the city offices. 

For tax purposes, employers maybe providing fringe benefit on a car if they make available a car that they own or lease for an employee’s private use. For purposes of FBT benefit, a car can only benefit from FBT tax if

• It is a station wagon or a sedan in make
• Vehicle used for carrying goods with a cc(carrying capacity) which is less than a tone. An example is a panel utility or a van and this include 4WD vehicles.
• Finally, it is a vehicle that carries passengers but is designed to carry fewer than

An employee is given a residue fringe benefit if the vehicle is not a car rather than a car benefit from fringe. On private use, is regarded to be so if the employee uses it for private purposes. Secondly, If the car is parket at employees home due to security reasons alone. It is regarded as being used privately regardless of whether the employee has the right to privately use the vehicle.

Additionally, if the offices and the private residence of the employee are at a similar locality, the car is regarded to be privately used. In Australian tax laws, home to work travel is considered to be private use of the vehicle.

Car Benefit Exemptions

There aredifferent reasons and factors where the vehicle is exempted from Fringe Benefit Tax. Here is an example, if the employee uses the vehicle as a panel van or a taxi or a utility car that is only designed to carry less than 1 tone is exempted from FBT as long as privately it is only used for

• Travelling between work and home
• Some incidental travel that are related to the employment and its course and in the course of carrying out employment functions
• Minor work that is non-work related, this should be frequent and irregular work and an example is using the car to dispose domestic garbage.

Simillar benefits that are related to the car and its use while not a car fringe benefit include

• Providing employees with car parking and they may be providing fringe benefits on car park
• Reinbursement or payment of an employee with expenditure and they may be providing a fringe benefit payment expense.
• The employer may allow the employees to use their employers electronic toll tag, they may also provide fringe benefit on the residual.
• The employer may allow the employees to use motor vehicles that is usually not accounted to as a car and maybe providing them with residue fringe benefit.

Lucy’s Fringe Benefit Liability computation

Step 1: work out the taxable value of the fring benefit

Fringe Benefits Tax Liability

Operating cost formula method

Deemed cost for depreciation

85,000*0.25*(335/365) = $19,503 rounded

The depreciation formula for fringe benefit tax liability is the cost for the car, multiplied by depreciation tax and the number of days from May to April 1^st.

Step 2: aggregate fringe benefit amount

Item	$ amount
Stamp duty	250
Registration & Insurance	1100
Petrol and Oil	1500
Repairs and maintainance	800
Lucys contribution to fuel	1500
Parking fees (20*365)	7,300

 
Working on parking fees= 208365= 7,300

Lucys fringe benefit

Item	Item
Parking fees	7,300
Contribution to fuel	1500
Total fringe benefit	8800

 

Step 3; total taxable fringe benefit amount

Item	Item
Parking fees	7,300
Contribution to fuel	1500
Total fringe benefit	8800

Step 4; tax payable

Statutory value – taxable amount

(ABC/D)-E

Where

A= Base value of the car

B=statutory fraction

C=No of days car is provided

D=Number of days in a yaer

E=Recipient contribution

Operating cost formula method

Deemed cost for depreciation

85,000*0.25*(335/365) = $19,503 rounded- Recipient contribution

8800

19,503-8800

=$10,703

An employee is given a residue fringe benefit if the vehicle is not a car rather than a car fringe benefit. On private use, is regarded to be so if the employee uses it for private purposes. Secondly, The car is parked at Lucy’s home most of the night as there are no parking spaces secured in the city offices. It is taken as being privately used regardless of whether the employee has the right to use the car privately. The employer should assess their FBT annual liability for the FBT year which begins from 1^st of April to 31^st of march and then lodge an FBT return.

What tax consequences may arise when selling a land plot

In Australia, the amount of land tax that one pays is dependent on the combine unimproved value of the taxable property. One does not usually have to pay for land tax on the main home or a permanent residence. However land owned by some organizations can be tax exempt. 

The tax base for Australian land tax depends on many other factors. The land tax is a state tax on ownership of land which include( vacant land, home unit or a flat). In the new south wales region, the land used for the principle land place of residence up to a certain threshold which is primarily for production purposes, maintaining endangered birds and animals, nursing homes and retirement homes.  Municipal rates are reviewed on a variety of tax bases. Local government can levy taxes on

• Value of Unimproved land
• site value and land value
• Improved land and buildings value
• Rental value of land and buildings : gross annual land value

An individual sells a land plot acquired in 2017 to an organization in which he is the CEO, below the cadastral value. Market value was not evaluated.this are the tax consequences on  an individual and an organization have in connection with this transactio. On this issue, we adhere to the following position: if the value of the land indicated in the contract of sale is less than the estimated value defined as the product of the cadastral value of the land and the coefficient of 0.7, then for calculating personal income tax it is necessary to take income in the amount of the specified estimated value. At the same time, an individual has the right to reduce the income received by documented expenses for the acquisition of this site or to receive a property tax deduction in an amount not exceeding 1,000,000 rubles. An organization does not have income when acquiring a land plot subject to income tax. We don’t see grounds for additional tax assessment by the tax authority on the transaction in question. Personal income tax Income received by an individual – a tax resident of Australia, from the sale of a land plot located in the Australia that belonged to this natural person by right of ownership is subject to personal income tax (. If the period of ownership of an immovable property at the time of sale is equal to or exceeds the established minimum time limit for ownership of real estate, income received by the taxpayer from its sale shall be exempt from taxation on the basis of clause  of the Tax Code.

Operating Cost Formula Method

Since in this situation the sale of the plot is planned before the expiration of the minimum tenure of the Tax Code), the income received is not exempt from personal income tax. In this case, the seller – an individual has an obligation to independently calculate and pay personal income tax based on the amount received from the sale of the plot. The income received must be declared by submitting at the place of residence a declaration in the form no later than April 30, 2019 (Tax Code of the Australia). Income from the sale of land is subject to personal income tax at the rate of 13%. The Australian  organization – the buyer of the land is not a tax agent in this case. Note that by virtue of the provisions of Article 1 of the Civil Code of the Australia property tax laws, the parties to the contract are entitled to set any price for the transaction, including below the cadastral value. At the same time, when determining the tax base for personal income tax from the sale of land acquired in ownership after, according to which the value of the property sold, indicated in the contract of sale, must be compared with the calculated value, defined as the product of the cadastral value of the plot by a decreasing coefficient . And if the income received from the sale is less than the estimated value thus determined, then for the purposes of taxation of personal income tax, the income is taken equal to the cadastral value of this property, multiplied by a decreasing coefficient of 0.7. Thus, if in the situation under consideration the cost of the plot indicated in the contract of sale is less than the above estimated value (cadastral value × 0.7), then for calculating personal income tax it is necessary to take the specified estimated value. In this situation, the taxpayer has the right to receive a property tax deduction for the sale of property

The agricultural enterprise leases the land plot of communal property and plans to transfer it to sublease to another business entity. Who, in this case, will have to pay rent and file a tax return on land payments.  Does the object of VAT taxation arise in this situation? “On Land Lease”, the leased land plot or part of it can be subleased by the lessee without changing the purpose, if it is provided for by the lease agreement or if the lessor agrees in writing. If within one month the landlord does not send a written notice regarding his consent or objection, the leased land or part of it may be subleased. The terms of the sublease of the land should be limited to the terms of the lease of the land and not contradict it. So, the payer of the rent (regardless of the fact of transferring land to sublease) is a person who, according to the contract, is its tenant. That is, it is the tenant (and not the sublease) of state or communal property land that must compile and submit reports on land payments and pay the amount of such rent to the appropriate budget. of the Tax Code it is determined that the sale of the results of work (services) is any economic or civil operation involving the performance of work, the provision of services, the grant of the right to use or dispose of goods. Selling the results of work (services) includes, in particular, the provision of the right to use goods under operating lease (lease) agreements. Therefore, the operation of subletting a land plot is an operation for the supply of services. According to Australian Tax Code exempts from taxation operations on rent for land owned by the state or territorial community, if such rent is fully credited to the relevant budgets. The lease under a sublease agreement for a state or communal land plot does not go directly to the corresponding budget, but is credited to the bank account of the taxpayer (a person who has entered into a sublease agreement for the land). Therefore, the cost of the services provided under the sublease agreement (rent) is subject to VAT (at the basic rate – 20%).

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