TAX LAW

TAX LAW



TAX LAW

Introduction

Fringe Benefits refer to a benefit provided other than cash by an employer to an employee for the services being offered by the employee. Employer offers fringe benefits to existing, old and prospective employees. Fringe benefits include things such as providing employee's access to using company car, educational allowances and healthcare benefits. Fringe benefits are taxable under the Australian Tax Law. It is the employer who has to pay taxes for the benefits provided to the employer. If benefits are related to workplace concern, or they are a one off event, or the amount is less than $300 then such fringe benefits would be counted as tax exempt fringe benefits.

Question 1

A: University of Tax would have to pay taxes if it provides this benefit to Kerry. Under the Australian Tax law, benefits provided to employee for an amount less that $300 is tax exempted. This could not come in the category of minor benefits being presented by University of Tax to Kelly as the amount is in excess of $300. Although providing cash vouchers for Christmas is a one off event as Christmas comes once a year, if this amount had been less than $300, then this benefit would have been tax exempted.

The University of Tax will have to pay taxes for this benefit. Kelly won't be responsible for paying taxes on this benefit as fringe benefits taxes will have to be bear by the employer under the Australian Tax Law. The vouchers amount to $500, which is in excess of the amount allowed for tax exemption (Australian Taxation Office for the Commonwealth of Australia, 2012).

B: The loan provided Sorella would have to be taxed in the same manner as other fringe benefits are. Sorella has been provided a loan worth $10,000 without any interest charges. The interest rate charged on this loan would be the benchmark interest rates being set by the Reserve Bank of Australia. The rate applicable on this loan would be 7.80% p.a, with effect from 1 April 2011. Since Sorella would be returning half the loan amount, but even then the employer would have to pay tax for this loan fully as it's a benefit provided by Sorella's employer and comes under the category of loan provided by an employer.

If the relocation being done by Sorella was for work related purposes, then this amount wouldn't' have been taxed. She is relocating due to personal catastrophe that she faced in the form of her house getting blown away by the storm. The taxes applicable on fringe benefits amount to 46.5%. The gross amount of loan benefits is $ 10,000, so taxes paid by employer would be $ 10,000 multiplied by 0.465 that comes as $ 4,650. Additionally the employer would have to incur the interest charges on this loan as per the Benchmark interest rates (Lim, 2012). Sorella won't be paying any taxes and the whole responsibility of this tax would be borne by the ...