If your employer provides you with automobile benefits or allowances, you'd be wise to brush up on which CRA rules may affect you. Read on to learn more about automobile allowance rates and automobile benefits, and what it all means for your taxes.
What are the CRA automobile allowance rates?
Employers who provide their employees with automobile allowances have to follow CRA guidelines. The reasonable automobile allowance rates for 2019 are:
- 58 cents per kilometre for the first 5,000 kilometres. 52 cents for mileage thereafter
- Add 4 cents per kilometre in the Northwest Territories, the Yukon, and Nunavut
If you use your personal vehicle for business purposes, this is an important rate to know. It's the rate your employer uses to reimburse you, and you don't have to report it as income.
What does the CRA consider a reasonable allowance?
The CRA considers an allowance reasonable if it meets the following criteria:
- It only considers the business kilometres driven in a year
- The rate per-kilometre is reasonable
- The employer did not reimburse the employee for expenses related to the same use of the vehicle (some exceptions)
How does the CRA adjust automobile allowance rates over time?
Here are the CRA Automobile Allowance rates for the past decade.
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What are automobile benefits?
An automobile benefit is the value of the company car your employer gives you to use. Your employer will include the amount on your T4 slip. You calculate it using the standby charge, plus any operating expense benefit, minus any amount you paid back to your employer.
Standby Charge: you include this amount as income if you are an employee. It's for the benefit of using a vehicle your employer owns or leases. However, if you only use the car for work and you park it at work when you're done, there is no taxable benefit.
Operating Expense Benefit: if your employer pays all the operating expenses for the car you use for work, that's a taxable benefit. Operating expenses may include:
- Fuel and oil
- Maintenance and repairs
- Licence and insurance
Calculating benefits for motor vehicles that are not automobiles
You calculate benefits differently for motor vehicles not classified as automobiles. A motor vehicle is neither a trolley or a bus, nor designed to run on rails. It's for highways and streets but doesn't meet the criteria for automobiles.
If your employer provides you with a motor vehicle for work and personal use, you have to report it as a taxable benefit. Your employer will do it for you on your T4 slip. You calculate the market value of a similar vehicle, including GST/HST.
Reasonable per-kilometre allowance rates are the same as for automobiles.
Reasonable allowances
If you receive an allowance for business driving according to prescribed rates, that's part of your income. Your employer does not include this amount on your T4 slip. You do have to report a flat rate allowance, which is considered a taxable benefit.
Employers may choose to combine flat rate and per-kilometre allowance. For example, your employer may pay you a flat rate allowance for driving within your usual area of business. For out-of-town trips, they may choose to pay you a per-kilometre allowance.
Remember that you can only claim expenses if your employer doesn't cover them for you. Check out this Financial Post article from September 2018, about two workers whose claims landed them in tax court.
