Tax Alerts
Canada Revenue Agency Announces New Employee Benefit Rules
June 23, 2009
On June 11, 2009, the Canada Revenue Agency (CRA) announced a number of new administrative rules for employee benefits. Most of the new rules are beneficial, either in terms of the tax treatment of the employee or in terms of simplifying the process.
Here's a general summary of the changes (which apply to 2009 and subsequent years unless noted):
- Overtime meals - The CRA has relaxed the rules for overtime meals to reflect seasonal overtime and general market conditions. Employees will now only have to work an additional 2 hours daily for a meal reimbursement or allowance of up to $17 to be tax-free. Also, a weekly limit on non-taxable meals (less than 3 days a week) has been eliminated for seasonal or non-recurring overtime.
- Gifts and Awards - The CRA has simplified the rules, while keeping a separate $500 exemption for employee gifts and general awards and a second $500 exemption where a long-term service award is provided. Under the revised policy, the $500 dollar exemptions can now be used as a deduction when calculating taxable benefits. For gifts and general rewards, there will be no limit to the number of gifts/awards that can be given during the year. Cash and near cash awards continue to be excluded from this policy as before and are fully taxable. Also, the policy does not apply to non-arm's length employees. This change applies for 2010 and subsequent years.
- Employer-Owned Motor Vehicles – Also, the CRA has set out very detailed rules governing whether taking a vehicle home at night will produce a taxable benefit or not, and how that benefit would be calculated. Specific reference should be made to the CRA announcement. That said, it would appear this policy will only benefit people driving a fairly limited group of special purpose vehicles.
- Loyalty Programs - A lingering issue has existed for years where employees incur business expenses (that are reimbursed by their employers) using personal credit cards, and accrue reward points on these expenses that can be used for personal purposes. This was certainly beneficial to the employee, but there was no way an employer could possibly track and report a benefit. The CRA has essentially admitted this and has made it clear there generally shouldn't be a benefit. The CRA did say that organized activities designed to maximize employee points could be problematic.
- Travel and Meals Within a Municipality or Metropolitan Area - The CRA will accept that travel allowances (including meals) paid for travel within the employer’s municipality or metropolitan area may be excluded from income if the allowance is paid primarily for the benefit of the employer (which would be a question of fact).
- Surface Transit Passes Provided to Family Members of Transit Employees - Effective for 2010, the non-taxation of free or discounted surface transit passes only applies for passes provided to the transit employee and for the exclusive use of the employee (i.e. passes that can be used by family members will now be a taxable benefit).
If you have employees who may be affected or questions on these changes, contact your BDO advisor. More information is available in the CRA’s Income Tax Technical News, which is available at http://www.cra-arc.gc.ca/E/pub/tp/itnews-40/itnews40-e.pdf
