FBT, how does it work to your benifit as a director/shareholder/employee

[bicko]

Just been doing some reading on FBT, can someone just tell me if this example is right or not?

Lets say you have a nice profitable company dealing in real estate.

Ok company pays employee $2000 for annual health insurance
This reduces profit by the same amount, therefore saving the company $600 in tax.
However the company then has to turn around and pay 48.5% tax on this same $2000 = $970

So in real terms its cost the company an extra $370 dollars in tax

But it has cost the employee nothing except for the reportable fringe benefit (which only applies for child care/maintenance)

So if you do the same thing for a car purchase and the employee uses the car for 50% private use

Car = $40 000

So this has reduced the company profit by $40000 which equals a tax saving of $12000

So if private use was 50% then the FBT payable by the Company would be 48.5% of $20000 = $9700

So the car has cost the company $49700 - 12000(tax that would have been paid anyway) = $37700
of which you get a fair bit back in depreciation

So again the employee hasnt paid anything out of their own wage (an employee would had to have earnt approx $60000 to afford the
$40000 car)

Am I on the right track?....

it could be just late night rambling

 

[DaleGG]

HI

No, I am afraid that you are not. Not all expenses will be tax deductible to the company and so some of them will reduce the bank account and have no impact on the profit or the tax.

Dale