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On April 1, 2016, QP Pty Ltd (QP) purchased a new sedan car for $50,000 for the exclusive use of Sam, the associate director. On the day of purchase, a rear parking camera was fitted to the car at a cost of $5,000. Between the date of purchase and March 31, 2017, Sam traveled 30,000 kilometers in the car. QP paid all expenses except for petrol, which cost $1,350 and was paid by Sam. This amount was not reimbursed, and Sam provided the required declaration to his employer. QP is entitled to claim the input tax credits for GST purposes.

**Required:** Advise the FBT to be paid by QP in relation to the car for the year ended March 31, 2017.

Answer :

The FBT to be paid by QP in relation to the car for the year ended March 31, 2017, will be $5,170.

  1. Determine the Cost of the Car and Accessories:

    • Purchase price of the sedan car: $50,000
    • Cost of rear parking camera: $5,000
    • Total Cost: $50,000 + $5,000 = $55,000

  2. Calculate the Depreciation Expense:

    • For FBT purposes, the depreciation of the car can be calculated based on the effective life. For the purpose of this example, let’s assume the car has a useful life of 8 years.
    • Annual Depreciation = Total Cost / Useful Life = $55,000 / 8 = $6,875 per year
    • For the FBT year ending March 31, 2017, we will consider the whole year’s depreciation as the car was purchased on April 1, 2016.

  3. Calculate the Taxable Value of the Car:

    • For calculating FBT, the Taxable Value is often based on different methods. In this case, we can use the statutory formula method for the car fringe benefits.

    • Statutory Percentage: Since Sam traveled for personal use, the statutory percentage for FBT is typically 20%.

    • Taxable Value = Total Cost x Statutory Percentage
      = $55,000 x 20% = $11,000

  4. Consider GST Input Tax Credits:

    • QP is entitled to claim GST input tax credits for the car purchase. Assuming a GST rate of 10%, the GST component of the car purchase is:

    • GST = Total Cost / (1 + GST Rate) x GST Rate
      = $55,000 x 10/110 = $5,000

    • Therefore, the FBT payable will be calculated on the value excluding the GST input tax credit claims.

  5. Assess Other Expenses:

    • QP covered all the car's expenses, except petrol, which cost Sam $1,350 that was not reimbursed. However, since this is not a direct expense of QP, it does not affect the FBT calculation here.

  6. Calculate FBT Payable Based on the Taxable Value:

    • The FBT rate is typically 47%.
    • FBT Payable = Taxable Value x FBT Rate
      = $11,000 x 47% = $5,170.

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