CRA Reduces Administrative Burden For Employers

The CRA has announced changes to their administrative policy regarding employee taxable benefits, resulting in reduced administration for employers.

For most employees, the value of all benefits accruing to them as a result of employment is included in their income under Section 6 of the Income Tax Act. Taxable benefits are included in income in Box 14 of the T4 Statement of Remuneration Paid (slip), so need not be added to income again. Some benefits also qualify for certain deductions:

• Housing, Board and Lodging: which can include a cleric's housing allowance, rent-free or low-rent apartments provided to caretakers, or subsidized meals or travel in a prescribed zone or for medical travel. Offsetting deductions may be included for clerics or those who qualify for the northern residents deduction.
• Amounts for employee's personal use of employer's auto: It is possible that the employee may offset this benefit with a claim for Employment Expenses using Form T777 Statement of Employment Expenses.
• Interest-Free Loans and Low Interest Loans: A deduction for carrying charges may be possible if the loan is used for investment purposes.
• Employee home relocation deduction: a deduction may be possible on Line 248.
• Security Options Deductions: a deduction may be possible on Line 249.
• Other taxable benefits, including amounts included for health or educational benefits may qualify for non-refundable credits like medical expenses or Tuition, Education and Textbook Amounts.
• Employment Commissions included in income may qualify for Employment Expenses on Line 229.

As part of the Government's 2007 Federal Budget, changes were to be implemented regarding tax-free gifts and awards to employees, lowering the work hours required for tax-free meal allowances for employees and a reduction in reporting for employee allowances for travel.

We will review the CRA administrative policies regarding the updates to the current gift and awards policy beginning in 2010.

Non-cash gifts and awards to arm's length employees will be considered non-taxable if the value of all the non-cash gifts and awards to the employee total less than $500 annually. Values in excess of the $500 annual amount will be taxable. Non-cash anniversary or long service awards will also qualify for the non-taxable status if they are under the $500 threshold amount, but any excess amount will be taxable. The award must be for service of more than five years, or it must have been more than five years since the last service award was presented to the employee.

Employee gifts such as coffee or tea, coffee cups, company logoed T-shirts, plaques or trophies with nominal value will not be included as a taxable benefit to employees. The CRA's administrative policy with regard to the qualifying nature of gifts will remain unchanged, so that performance related awards and cash or near cash gifts (gift cards or certificates) will be included in employees' taxable income.

The Canadian Payroll Association is supportive of the changes by the Government with respect to the administrative relief provided by the changes in employee taxable benefit treatment, while the Federal government believes the changes will reduce the paperwork of small business and ìallow Canada's entrepreneurial advantage to be developed.î

To see the full news release, click here.

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