Administrative Policy Changes for Taxable Employment Benefits

To lessen the administrative burden and maintain equity, the Canada Revenue Agency announced changes to its administrative policies for taxable employment benefits in June 2009.  The policies affected include:

  • Overtime Meals and Allowances Provided to Employees
  • Municipality or Metropolitan Area
  • Loyalty Programs
  • Employer Provided Motor Vehicles Required to be Taken Home at Night
  • Non-cash Gifts and Non-cash Awards
  • Surface Transit Passes Provided to Family of Transit Employees

Overtime Meals and Allowances Provided to Employees

This policy that provides for a non-taxable status of certain overtime meals or reasonable allowances for overtime meals has been adjusted so that no taxable benefit will apply if:

  • The value of the meal or meal allowance is reasonable (up to $17)
  • The employee works at least two hours of overtime immediately before or after his/her regularly scheduled hours
  • The overtime is infrequency and occasional in nature (less than three times a week)
  • The benefit will be taxable if overtime is more frequent than three times a week

Municipality or Metropolitan Area

This policy that provides for non-taxable employer-provided travel allowances paid for travel in a municipality or metropolitan area has been more narrowly defined to specify that allowances will be non-taxable only when paid primarily for the benefit of the employer.

Loyalty Programs

CRA has left it to employees to determine and include in income the fair market value of any benefits the employee received from Loyalty Programs such as frequent flyer points.  Effective in 2009, CRA will no longer require these benefits to be included in income if:

  • The points are not converted to cash
  • The program is not in lieu of remuneration
  • The program is not for tax avoidance purposes

If the employer, and not the employee, controls the points earned, the employer will still need to report the fair market value of the benefits to the employee on the T4 when points are redeemed.

Employer Provided Motor Vehicles Required to be Taken Home at Night

CRA will change the rate used to determine the taxable benefit an employee receives when a vehicle not defined as an “automobile” must be taken home at night if:

  • The employee does not use the vehicle for any personal use
  • The employer has legitimate business reasons for requiring the employee to take the vehicle home at night
  • The vehicle is specifically designed for and essential to the employer’s business

The rate will change from 52 cents per kilometer for the first 5000 kilometers and 46 cents for each additional kilometer to 24 cents per kilometer.

Non-Cash Gifts and Non-Cash Awards

Where this policy formerly granted non-taxable status to two non-cash gifts totaling under $500 and two non-cash awards totaling under $500, the policy has been changed to eliminate the limit of two gifts and two awards.

Non-cash gifts and non-cash awards, regardless of number, will not be taxable to the employee as long as the aggregate total of all non-cash gifts and non-cash awards is less than $500 annually
In addition, a separate non-cash longevity/anniversary award of $500 or less is non-taxable to the employee.

The gift and award policy does not apply to relatives of a proprietor or shareholders of closely held corporations.  Items of an immaterial amount will not be taxable to employees.  Examples include T-shirts, coffee cups, coffee, tea, etc.  Gifts and awards of cash or cash value remain taxable.  A shortfall of non-taxable awards/gifts cannot be applied to offset a taxable benefit.

Surface Transit Passes Provided to Family Members of Transit Employees

Effective in 2010, only transit passes provided free or at a discount to a transit employee for his/her exclusive use will be non-taxable.  Passes provided to employees’ family members will be considered a taxable benefit.

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