Donna Mazerolle & Associates Newsletter
Issue 10 – February 2012
Taxable Benefits and Business Expenses
This month’s newsletter provides details on some recent CRA tax interpretations and rulings that provide guidance on cell phone allowance, automobiles stand by charge, per diem allowance and travel logs.
For more details on these and other taxable benefits and business expenses you need to be aware of, feel free to call me at 506-657-4067 or 1-800-650-4067.
CELLULAR PHONE ALLOWANCE
I n a June 8, 2011 Technical Interpretation, CRA notes that CRA Guide T4130 provides that where an employer reimburses an employee for the cost of a cellular phone service plan and the primary use is for business purposes, the reimbursement would generally not be considered a taxable benefit if:
- the Plan’s cost is reasonable,
- the Plan is a basic Plan with a fixed cost, and
- the employee’s personal use of the service does not result in charges that are more than the basic Plan cost.
However, CRA notes that a taxable benefit may arise where additional charges are incurred as a result of the employee’s personal use of air time minutes or personal long distance calls.
Also, when a reimbursement by an employer relates to an asset purchased and owned by an employee, a taxable benefit may apply.
AUTOMOBILE STANDBY CHARGE
In a July 12, 2011 Technical Interpretation, CRA notes that an automobile ceases to be subject to the automobile standby charge only when the employee is required by the employer to return both the automobile and its keys. Therefore, where an employee voluntarily surrenders the keys during a period of absence from work, CRA feels that those days must be counted in the calculation. (For calculation see CRA Form RC18)
PER DIEM ALLOWANCES
An employer may pay reasonable tax-free per diem allowances for board and lodging to an employee while at a special worksite if the employee otherwise maintains a principal place of residence and is away for at least 36 hours and the distance was such that he/she could not reasonably return daily from the special worksite to the principal place of residence.
In a November 3, 2010 Tax Court of Canada case, the taxpayer was a self-employed Remax residential real estate agent who received commissions of $81,440 and $79,552 in the 2005 and 2006 years.
The taxpayer did not keep a log of her business kilometres but she claimed that she had driven 31,185 kilometres and 23,693 kilometres in 2005 and 2006 for a business percentage of 95%.
CRA reassessed on the basis that only 55% of her kilometres were for business purposes.
The taxpayer appealed to the Tax Court of Canada and the Court noted:
- That keeping a log book for automobile expenses is not specifically required by the ITA. However, by not doing so, she faces a heavier burden in proving that she used her motor vehicle almost exclusively for business purpose.
- The Court understood that keeping a log book may be tedious and may not always be practical; however, it would be useful in determining the actual business use.
- The Court noted that if she did not have time to report all her business driving, which they serious doubt, she could have reported her personal driving.
CRA countered with a proposal to allow 75% and the Court agreed.
For more info:
See www.cra.gc.ca/whtsnw/lgbk-eng.html for CRA’s comments on “Documenting the Use of a Vehicle”.