Question

Evita accepts an offer of employment made by Quality Lawyers Pty Ltd (Quality) to be their new marketing manager. Her salary package includes:

Payment of her family’s life insurance premiums. The cost is $32,000. Evita would not be entitled to claim a deduction under the Income Tax Assessment Act 1997 or 1936 had she paid the amount. Quality is not entitled to claim an input tax credit for GST purposes. The payment was made on 1 April 2016.

Required: Advise Quality of the fringe benefits tax payable, if any, (rounded to the nearest dollar) for the FBT year ended 31 March 2017

Answer 1

Since Quality Lawyers Pty Ltd not entitled to claim an input tax credit for GST purposes, therefore FBT rate and Gross up rate will be applicable as follows:-

FBT year	FBT rate	Type 2 gross-up rate
Year Ending 31 March 2017	49%	1.9608

Fringe benefit amount	32000
Gross up amount	62746
(Amount*1.9608)
Fringe Benefit Tax	30745
(Gross up Amount*49%)