Division 7A or Fringe Benefits Tax

Q&A Tax

Question :

AAA Pty Ltd is owned by two shareholders John and Mike in equal shares. John is actively managing the
company as a director while Mike is a passive shareholder who has no active role.

In FY2018, AAA Pty Ltd purchased a BMW which costs $100,000 to Mike. The car is provided to Mike
in his capacity as a shareholder.

Whether the car is subject the Division 7A or Fringe Benefits Tax?

 

Answer :

The provision of the luxury car to Mike for his personal use would not be subject to FBT because the
car was not provided “in respect of the employment of an employee”. Mike is not an employee of AAA
Pty Ltd, he is only a passive shareholder of the company.

However, the car would constitute a “payment” under s 109CA and as such trigger the operation of Div
7A. The provision of an asset for use (other than a transfer of property) by a shareholder or
shareholder’s associate falls within the meaning of “payment” for Div 7A purposes. The time that the
payment is made is the time that Mike first uses the asset or has the right to use the asset (s
109CA(2)).

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