Employment income taxable benefits

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taxable-benefitsAutomobile made available to an employee;

Where, in a year, an employer or a person related to an employer makes an automobile available to an employee or to a person related to an employee, a taxable benefit is deemed to have been received by the employee. This taxable benefit is composed of two elements: a standby charge and an amount with respect to operating expenses of the automobile.

Standby charge

The basic taxable benefit (standby charge) equals to 2% per month of the original cost of an automobile, including taxes, or 2/3 of the leasing cost including taxes, but excluding insurance. This benefit is proportionally reduced if, during the time the automobile is made available, the employee’s personal use of the automobile is less than 20,004 kilometres per year or 1,667 kilometres per month.

This reduction is made available to individuals who:

-use the automobile primarily in the performance of employment duties i.e. more than 50% of the total kilometers driven); and

-are required by the employer to use the automobile in the performance of their duties.

The standby charge is also reduced by the amount paid during the year, by the employee to the employer, for the use of the automobile.

Operating expenses

The employer may determine the amount of this benefit using a rate. For 2012 the prescribed rate is 26 cents per kilometer travelled for personal use (23 cents in the case of a person selling automobiles). However, eligible employees may elect to calculate the operating expense benefit as one-half of the standby charge. To take advantage of this calculation method, the employee must notify the employer in writing of his intention before the end of the year and the automobile must be primarily (more than 50%) for business purposes.

The operating expense benefit must be reduced by the amount paid by the employee to the employer for those expenses in the year or, in the first 45 days following the end of the year.

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