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FBT: How to Structure Remuneration Packages for 1986–87
Author(s) -
Martini Christine,
Collins Brett,
Rickard John
Publication year - 1986
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1986.tb00646.x
Subject(s) - remuneration , point (geometry) , value (mathematics) , tax rate , income tax , business , economics , marginal utility , marginal value , microeconomics , accounting , actuarial science , monetary economics , finance , public economics , mathematics , statistics , geometry
Abstract The purpose of this article is to determine the optimal structure of remuneration packages in the new fringe benefits tax (FBT) environment. We will describe precisely how the optimal structure of remuneration packages depends upon the (marginal) rates of FBT, personal income tax and corporate tax. The fundamental decision rule for employers and employees to optimise the value of remuneration packages is quite simple. First substitute the FBT rate, f, and the employer's marginal tax rate, t, into I = f(1 + f ‐ t) ‐1 . Then if the employee's marginal tax rate i is greater than I the employer should provide any benefits until i falls to the value I. At or below this point the employee would be better off to provide all subsequent benefits.