JB Pty Ltd (JB) is a shoe manufacturer which sells its shoes directly to the public. On 1 May 2010, JB provided one of its employees, Jan, with a car as Jan does a lot of travelling for work purposes. However, Jan's usage of the car is not restricted to work only. JB purchases the car on that date for $55,000 (including GST).
For the period 1 May 2012 to 31 March 2011, Jan travelled 10,000 kilometres in the car and incurred expenses of $550 (including GST) on minor repairs that have been reimbursed by JB. The car was not used for 10 days when Jan 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 2010, JB provided Jan with a loan of $2,000,000 at an interest rate of 2,5%. Jan used $1,500,000 of the loan to purchase a new yacht an holiday home and lent the remaining $500,000 to her husband (interest free) to purchase shares in Nation Australia Bank.
During the year, Jan purchased shoes manufactured by JB for $700. The shoes only cost JB $300 to manufacture and are sold to the general public for $1,000.
(a) Advise JB of its FBT consequences arising out of the above information, including calculation of any FBT liability, for the year ending 31 March 2011.
(b) How would you answer to (a) differ if Jan used $500,000 to purchase the shares herseft, instead of lending it to her husband?