Question 1: Find out whether the given benefits are fringe benefits or exempt fringe benefits and, where applicable, the relevant category of fringe benefit. Give reasons for your answer:
a) Kerry is an employee of the university. She is given with 10 gift vouchers worth $50 each for use at the local supermarket as a Christmas gift. Advise Kerry and the University of the Tax Consequences of this transaction.
b) Sorella borrowed $10,000 from her employer on 4 September 2011 as her home was damaged in a freak storm. The loan was given at no interest. On 15 January 2012, her employer informed Sorella that she was only required to repay half the loan. Advise Sorella and her employer of the Tax Consequences of this transaction.
c) Penny is employed as a secretary by a law firm. As part of her remuneration package, the firm agrees to give her with legal services in relation to her divorce at a 60% discount to its normal rates. The firm as well purchases a plasma TV set for $5,500 (inclusive of GST), which it gives to Penny. Describe how the taxable value of such fringe benefits will be computed.
Question 2: Peter sold an investment property in Sydney and the transaction was settled on 30 June 2012 for $800,000. He incurred legal fees of $1,100 and a real estate agent’s commission of $9,900 in relation to the sale. Peter purchased the investment property in March 1987 for $100,000. He paid $2,000 in stamp duty on the transfer and incurred legal fees of $1,000 in relation to the purchase.
a) Compute the capital gain under the indexation method.
b) Compute the capital gain under the 50% discount method.
c) Which method must be used in this case?