Taxable and Non Taxable Auto Allowances and Benefits

Reasonable motor vehicle allowances are not taxable if it is reasonable.

Motor vehicle allowance is deemed reasonable if the allowance is based on the number of kilometres driven - is not too high or too low in relation to the actual cost - and the employee is not reimbursed for actual expenses. However, the employee can be reimbursed for supplemental business insurance charges, bridge and ferry tolls.

Employer’s GST Remittance for Taxable Auto Benefits

The remittance rates are as follows:

The lower rate applicable to the operating cost benefit reflects the fact that insurance is typically included in operating costs, and it is exempt from GST/HST.

* 4/104 for large corporation in Ontario

** 6%  for large corporations in Ontario

*** 5.63 for large businesses in PE

* 6% for large corporations in Ontario

** 6.6% (2015) for large corporations in Ontario

*** 6.5% for large businesses in PE (2014-2017)

If the employer provides a vehicle to an employee in order for him/her to carry out their duties, and the employee also has the vehicle for personal use, the employee will be assessed a taxable benefit as follows:

•     Stand-by Charge - calculated as 2 per cent of the cost of the vehicle per month as long as the employee has access to the vehicle. If the vehicle is leased, the Standby Charge is two thirds of the monthly lease cost.
•     Operating Cost Benefit – any expenses paid by the employer related to the operatiion of the vehicle (e.g. gas, oil, insurance, maintenance etc). The benefit is calculated as 27 cents per personal kilometre (as per rates listed). Beyond that, the operating cost benefit is calculated at a flat rate and not on expenses paid.

Special rates apply to employees of employers whose main business is selling or leasing automobiles. For these examples, the standby charge is 1.5 per cent of the cost of the vehicle per month and the operating cost benefit is 24 cents as per rates below.

Each year, CRA publishes the maximum per kilometre rate for a reasonable allowance and for the operating cost benefit.

The rates are as follows:

Taxable Benefit Relating to the Personal Portion of Automobile Operating Expenses paid by Employers

2014-2015 Rates:

    27 cents per kilometre for employees who are not an auto salesperson
    24 cents per kilometre for auto salespersons

Maximum Per-Kilometre Rate for Non-Taxable Auto Benefits

2014 Rates:

    Most provinces: 54 cents/km for the first 5,000 km (48 cents/km thereafter)
    Northwest Territories, Yukon and Nunavut: 58 cents/km for the first 5,000 km (52 cents/km thereafter)

2015 Rates:

    Most provinces: 55 cents/km for the first 5,000 km (49 cents/km thereafter)
    Northwest Territories, Yukon and Nunavut: 59 cents/km for the first 5,000 km (53 cents/km thereafter)

Example 1:

Employer paid a standby charge benefit to an employee of $6,000 and an operating expense benefit of $2,000. The company is located in New Brunswick.

Example 2:

If the same company was located in the Northwest Territories and paid the same amount the calculation would be as follows: