Fringe Benefit Tax Case Study
Fringe benefit refers to the benefit that is provided toan employee or an associate of the employee by the employer or associate of an employer in any given year in respect of the employment of the employee. It refers to any benefit that is provided over and above the salary of an employee. Benefit refers to anything that is provided to the employee by the employer which he would actually have to incur himself if the benefit was not provided by the employer.
It aims at levying tax on the benefits that cannot be availed by the employee or an associate of employee but cannot be converted into cash. All the benefits that are provided are in respect of the employment of the employee.
An employer can either be a former …show more content…
All the items of forming part of remuneration package for Alan have been hereby discussed separately for the applicability of Fringe Benefit Tax:
• Salary – Salary does not form part of Fringe Benefit Tax and is thereby excluded from the purview of Fringe Benefit Tax.
• Mobile Phone Bill –In the case of Mobile Phone Bill initially we can state that Fringe Benefit Tax would not be levied as the Mobile is being used for official purpose. However, on close examination of the scenario we can state that the mobile phone bill is a committed expense for Alan as it is under two-year contract. Therefore, the sum would be charged irrespective of the fact that whether it is being used for official or personal purpose and whether Alan is associated with the company in the future or not as per this scenario. Therefore, it would be Fringe Benefit Tax would be levied on it. However, we have to also note that any benefit that is given to the employee whose:-
i) Taxable value is less than …show more content…
The above limit would apply to each exemption and it would not be cumulative exemption.
In the given case we can observe that the mobile phone bill of the employee is $220 which would come under the purview of above but it has also to be noted that the mobile bill phone expense is a recurring expense and it would recur every month. Therefore, it would not suffice the second condition for being regarded as an exempted benefit and therefore, Fringe Benefit Tax would be levied on it.
• Payment of Alan’s Children School Fee: In the given case we can observe that it isnot an allowance rather a reimbursement for the actual expenditure that has been incurred by the employee. Therefore, it would be considered as a Fringe Benefit and Fringe Benefit Tax would be levied on it. In the given case, we can clearly observe that it is a benefit that is provided by the employer to the employee and therefore, Fringe Benefit Tax would be applicable on it.
• Mobile phone handset: In the given case, the employer has provided the employee with a mobile phone handset costing $2,000. There are certain items that are exempt from Fringe Benefit namely:-
i) a portable electronic