Taxation of Employee Remuneration


Renovations Pty Ltd (Renovations) is a company carrying out housing renovations for select clients inspired by television renovation shows. You are provided with the following details relating to individuals performing work for Renovations.
a) Jane is the manager and an executive director of Renovations.
Jane received the following payments from Renovations in the
income year:
Salary $ 85000
Allowances $ 15000
Director?s remuneration $ 10000
Jane?s remuneration package also includes the following:
i. The salary of $85000 is after $15500 was paid into
Jane?s superannuation fund as a salary sacrificed
contribution. This is in addition to the company?s
required superannuation guarantee contribution on her
gross salary (including the amount salary sacrificed for
ii. as a bonus to reward Jane for the improved results of
the company, Renovations agreed to provide Jane with
a remodelled kitchen at her private residence on condition that certain performance benchmarks are met. If these benchmarks are not met, Jane will be required to pay the cost of the kitchen over the following 12 months, but Renovations will provide an interest free loan until the cost is repaid. The new kitchen, valued at $15000, is provided and installed free of charge in Jane?s home.
iii. Jane is provided with a car and a parking space in the
building car park in the Sydney CBD. The parking space costs Renovations $3,000 pa. The car is leased for $13,000 pa, with other outgoings of $200 per month. Jane travels 18,000km in the year.
iv. Jane paid her quarterly telephone bill which amounted
to $600. She estimates that she uses the phone 50% for business purposes. Renovations reimbursed her $400 in respect of this account. Would it make any difference if Renovations paid the entire account of $600 directly to the phone company and Jane then paid Renovations $200 towards the cost? In both cases you
may assume similar transactions take place each quarter.
v. Jane is reimbursed the cost of a laptop and a briefcase. When her laptop was stolen it was replaced by the company.
vi. Jane is invited to a party that Renovations throws for its major suppliers. The party entails the provision of free finger food, beer and wine and a display of exotic dancing.
vii. In June 2011, on receiving some money after the death of a relative, Jane makes a personal contribution of $160,000 to her superannuation fund.
b) Joe is a tradesman who has been employed by Renovations for
a number of years. Payments made by renovations to Joe for
the income year include:
Salary $ 55000
Living away from home allowance $ 6000
i. Renovations also paid superannuation of $18,000 to Joe?s superannuation fund. $6,000 of this was under the Superannuation Guarantee requirements, and the remaining $12,000 was paid at Joe?s direction from his before tax salary.
ii. Joe contributed a further $1000 to his superannuation
account from after tax salary, and $5000 to his spouse?s superannuation account. She had a part time job and earned $12000 during the year.
iii. Joe also qualified to receive a bonus of $2000 from
Renovations. Rather than receive the bonus in cash,
Joe asked Renovations to apply the amount to pay for
his private Medical insurance.
c) Renovations conducts a raffle for its 500 employees
nationwide, with the one lucky winner to be given a huge TV
set valued at $4,200. Renovations buys the set as it does not
make or sell TV sets. Each employee is given a free ticket. Joe
wins the raffle. Would it make any difference to your answer if
renovations charged each employee 50 cents to purchase a
ticket and they did not have to purchase a ticket?
Required: In relation to the above information, discuss the income tax, fringe benefits tax, superannuation, PAYG withholding and payroll tax consequences for Renovations, Jane and Joe.
Evaluation criteria
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? identification of key facts and the integration of those facts in
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? demonstration of a critical mind at work and, in the case of
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(including, where appropriate, headings)
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? accurate numerical answers
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