What Are Automobile Benefits?

by Tax Guy - Burlington Accountant on March 12, 2010 Print This Post Print This Post

Does your employer provide you a car? Do they reimburse you for using your own car or provide an allowance or per diem for using your own car? If so, you may have a taxable automobile benefit to report on your income tax return.

The Income Tax Act provides that all remuneration of any kind is taxable employment income. Any you may have a taxable automobile benefit if your employer:

  • Provides you with a company car that can be used for both personal and business use.
  • Reimburses you all of the operating costs of your own personal vehicle or a company supplied vehicle.
  • Provides an allowance to compensate you for use of the your or their vehicle.

If you are an employee or salesperson of an automobile dealership, you may also incur a taxable automobile benefit.

Your individual circumstances will determine the amount and types of taxable benefits related to automobiles.  By understanding these circumstances you can work with your employer to determine to structure your benefit and ensure you have the best after-tax result.

There are three taxable automobile benefits that may arise:

  1. Standby Charge: The standby charge is a taxable benefit that occurs when your employer provides you with a vehicle and makes it available for your personal use.
  2. Operating Cost Benefit: The operating cost benefit arises when your employer provides you with a vehicle and pays all of the operating costs of that vehicle (i.e. fuel and maintenance).
  3. Automobile Allowance Benefit:  The automobile allowance results in a taxable benefit only if the amount of the allowance is unreasonable.  An allowance is considered reasonable when it is based on the number of kilometres driven for employment and a reasonable rate per kilometre.  The maximum rate per kilometre is set by the Finance department annually in December.

The amount of the taxable benefit to you can be reduced in certain circumstances. For example, if your use of your employer supplied vehicle was more than 50%, the standby charge may be reduced.

See Also

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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{ 2 comments }

Rob Thornhill December 28, 2010 at 4:45 pm

Is there a taxable benefit is my employer expects me to be on call 24 X 7 and I take the vehicle home each night? It will also get used for personal use on occasion.

Tax Guy December 29, 2010 at 12:22 pm

There can be taxable benefits depending on the amount of
personal use. Take a look at this article:
http://blog.taxresource.ca/if-your-employer-provides-an-automobile/

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