| Country : | Australia |
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Assignment Task:
Question
Part A
ABC Pty Limited (ABC) is an architecture practice based in Sydney. Susan holds 100% of the shares in ABC and has never been an employee of ABC. Jenny is the managing director of ABC.
During the fringe benefits tax (FBT) year ended 31 March 2019, ABC provided the following benefits:
1. ABC reimbursed Kevin (an employee) and James (a contractor who provided an ABN and is engaged for a major project) for computer software which they purchased and used solely for working on ABC client projects. The cost of the software was $1,000 to each worker.
2. In 2017, ABC provided its chief financial officer and his wife (not an employee of ABC), with an interest-free loan of $20,000. The couple used the loan to pay for repairs to their jointly held rental property. The $20,000 loan remains outstanding at the end of the FBT year. The property was rented at market rates for the full year.
3. Susan and Jenny went on a holiday together to Queensland. ABC paid for their business class flights, which cost $2,200 each. Susan did not reimburse the company for the expense; however, Jenny paid 50% of the cost from her after-tax salary.
4. In December 2018, ABC paid for a Christmas lunch that Jenny hosted at her favourite restaurant. In addition to Jenny, there were five clients in attendance. The total cost of lunch was $1,500.
ABC had a distributable surplus of $1 million at 30 June 2019. It uses the 50/50 split method for calculating meal entertainment benefits.
ABC is registered for GST and where relevant has the necessary tax invoices. All relevant private use declarations have been provided by employees to ABC.
(a) Calculate the total FBT payable by ABC for the FBT year ended 31 March 2019. Briefly explain any nil amounts. Show all workings.
(b) For items 3 and 4 above, briefly explain the:
(i) Income tax considerations for ABC for the income year ended 30 June 2019.
(ii) GST consequences for ABC.
Part B
Pet Pty Limited (Pet) is an Australian resident company that has been 100% owned by Joe, an Australian resident for tax purposes, since the company was established in 1992.
On 1 July 2018, Joe sold all his shares in Pet to Martha. No changes have been made to the business since it was bought by Martha. During the income year ended 30 June 2019, Pet received the following:
• Trading income of $15,000.
• A $40,000 dividend from a large mining company, Park Limited (Park), franked to 100%. Park has a corporate tax rate of 30% for imputation purposes. Pet has received dividends from its shareholding in Park since 1992.
Pet has no other assessable income or expenses for the income year ended 30 June 2019.
Pet is a base rate entity and has a carry forward tax loss of $60,000.
Required
(a) Explain whether Pet can use the carry forward tax loss in the income year ended 30 June 2019. (Note: You do not need to provide calculations).
(b) Ignoring your conclusion in (a) above, assume that the carry forward tax loss is available to be recouped during the income year ended 30 June 2019. Calculate Pet’s minimum tax payable for the income year ended 30 June 2019. Show all workings.
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