Periwinkle Pty Ltd (Periwinkle) is a bathtub manufacturer which sells bathtubs directly
to the public. On 1 May 2015, Periwinkle provided one of its employees, Emma, with a
car as Emma does a lot of travelling for work purposes. However, Emma’s usage of the
car is not restricted to work only. Periwinkle purchased the car on that date for $33,000
(including GST).
For the period 1 May 2015 to 31 March 2016, Emma travelled 10,000 kilometres in the
car and incurred expenses of $550 (including GST) on minor repairs that have been
reimbursed by Periwinkle. The car was not used for 10 days when Emma was interstate
and the car was parked at the airport and for another five days when the car was
scheduled for annual repairs.
On 1 September 2015, Periwinkle provided Emma with a loan of $500,000 at an interest
rate of 4.45%. Emma used $450,000 of the loan to purchase a holiday home and lent the
remaining $50,000 to her husband (interest free) to purchase shares in Telstra. Interest
on a loan to purchase private assets is not deductible while interest on a loan to
purchase income-producing assets is deductible.
During the year, Emma purchased a bathtub manufactured by Periwinkle for $1,300.
The bathtub only cost Periwinkle $700 to manufacture and is sold to the general public
for $2,600.
(a) Advise Periwinkle of its FBT consequences arising out of the above information,
including calculation of any FBT liability, for the year ending 31 March 2016. You may
assume that Periwinkle would be entitled to input tax credits in relation to any GSTinclusive
acquisitions.
(b) How would your answer to (a) differ if Emma used the $50,000 to purchase the
shares herself, instead of lending it to her husband?
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