Evita accepts an offer of employment made by Quality Lawyers Pty Ltd (Quality) to be their new marketing manager.
On 1 January 2020 Quality made an interest free loan of $900,000 to Evita. Evita used the $900,000 to buy Rio Tinto Shares. On 1 March 2020 Evita’s employer told her she did not have to repay $500,000 of the loan. Quality is not entitled to claim the input tax credit for GST purposes.
Required: Advise Quality of the fringe benefits tax payable, if any, (rounded to the nearest dollar) for the FBT year ended 31 March 2020.
An employer waives an employee's debt (that is, doesn't require repayment) they will have provided a debt waiver fringe benefit,
Since the Quality Lawyers Pty Ltd is not entitled to claim the input tax credit for GST purposes,the grossed-up taxable value by multiplying the total taxable value of all the fringe benefits by the type 2 gross up rate, which is as flollows:
FBT year |
FBT rate |
Type 2 gross-up rate |
Year Ending 31 March 2020 |
47% |
1.8868 |
Fringe benefit amount |
500000 |
|
Gross up amount |
943400 |
|
(Amount*1.8868) |
||
Fringe Benefit Tax |
443398 |
|
(Gross up Amount*47%) |
Evita accepts an offer of employment made by Quality Lawyers Pty Ltd (Quality) to be their...
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