FBT+expense++reimbursement

Example 1 of section 1 related to Mark, an employee of Phil’s Fridges and Freezers Pty Ltd, purchasing a freezer from the company for $1100.

When recording this transaction for the company the journal entry would be:

Account Tax Code Debit Credit Bank N-T 1100 Sales GST 1000 GST Collected on Sales N-T 100 (Where N-T=outside the scope of the GST system; GST=subject to GST.)

5 BOOKKEEPERS KNOWLEDGE BASE

Lets assume the cost of the Freezer to Phil’s Fridges and Freezers Pty Ltd was $2200 including GST.

The journal entry to record the purchase would be:

Account Tax Code Debit Credit Cost of Goods Sold (Purchases)/Stock GST 2000 GST Paid on Purchases N-T 200 Bank N-T 2200 (Where N-T=outside the scope of the GST system; GST=subject to GST.)

The fringe benefit supplied to Mark is a property fringe benefit with a taxable value of $2200.

The taxable value however has been reduced by the amount that Mark reimbursed to the company ($1100).

As Phil’s Fridges and Freezers Pty Ltd can claim an input credit for the expense of the freezer supplied, the benefit is a type 1 benefit for a net amount of $1100 ($2200 - $1100).

Usually when an arms length employee of a company receives a fringe benefit, the company will lodge a fringe benefits tax return and physically pay the fringe benefits tax. There are, however, many family companies that, rather than pay the fringe benefits liability, will reimburse the taxable value of the fringe benefit. This reimbursement may take place either by cash or via a journal entry to a loan account.

In our example, if the company decides to lodge a fringe benefits tax return, it will calculate the fringe benefits tax by grossing up the benefit and apply the FBT rate as follows:

Type 1 benefit $1100 Gross up rate 2.0647 Grossed up benefit $2271 FBT Payable @ 46.5% $1056

The fringe benefits tax, upon payment, would be recorded as follows:

Account Tax Code Debit Credit Fringe Benefits Tax Expense N-T 1056 Bank N-T 1056

(Where N-T=outside the scope of the GST system.)

By contrast, let’s assume that Mark was Phil’s son and, rather than paying the fringe benefits tax, the company chose to have the remaining fringe benefit extinguished by journalising the taxable value of the fringe benefit against the family’s loan account. You would instead record the following entry:

Account Tax Code Debit Credit Loan Shareholders/Directors N-T 1100 Fringe Benefit Reimbursement GST 1000 GST collected on sales N-T 100

Shareholder does not need to pay FBT for withdrawing by themselves.



= = https://en.wikipedia.org/wiki/Shareholder_loan =Shareholder loan = From Wikipedia, the free encyclopedia

Shareholder loan is a debt-like form of financing provided by shareholders. Usually, it is the most [|junior debt] in the company's debt portfolio, and since this loan belongs to shareholders it should be treated as equity. [|[1]] Maturity of shareholder loans is long with low or deferred interest payments. Sometimes, shareholder loan is confused with a loan from company extended to its shareholders. http://www.accountingtools.com/revenue-reimbursed-expenses =Record Reimbursed Expenses as Revenue =