Employment income
Pay interest on employee loans before January 30th
If you had a low-interest loan from your employer during any part of the year, you’re deemed to have received a taxable employment benefit. This is calculated as interest at the Canada Revenue Agency’s (CRA’s) prescribed rate for the period during which the loan was outstanding. The amount of the benefit is reduced by any interest you actually paid on the loan. However, the interest must be paid within 30 days of the end of the calendar year.
Note that if you have received a loan by virtue of your shareholdings rather than employment, the amount of the loan will be included in your income, even where interest is charged at the prescribed rate. However, an exception to this rule applies if the loan is repaid by the end of the taxation year of the lender following the taxation year in which the loan was received, in which case the loan balance will not be included in your income.
Reimburse personal operating costs on employer-provided automobiles before February 14th
If your employer provides you with a company car, a taxable benefit will be included on your T4. The actual benefit is made up of two parts. The first part is a standby charge based on a percentage of the original cost or the monthly lease payments for the automobile. The second part applies if your employer pays the automobile’s operating expenses. In 2007, this benefit is equal to 22¢ (no change from 2006) per personal kilometre driven and applies unless all amounts paid for personal operating expenses are reimbursed to the employer by February 14, 2008.
The standby charge and the operating benefit are reduced by the amounts you pay to your employer. For a standby charge reduction, your payment must be made during 2007. For an operating benefit reduction, your payment must be made by February 14, 2008.
Review your personal use of employer-provided automobiles
If your total personal driving is less than 20,004 kilometres (being 1,667 kilometres a month for 12 months) and represents less than 50% of total use, you may qualify for a reduction of the standby charge. Also, if your business driving exceeds 50% of your total kilometres driven, you can calculate your operating cost benefit as one-half of the standby charge, less reimbursements, if this is beneficial.
Review your automobile log to see if you’re close to these thresholds. If so, you may want to reduce personal travel with the company car where possible between now and the end of the year, to reduce your taxable benefits. Also, if you intend to use the alternate 50% method for calculating the operating benefit, you must advise your employer in writing by
December 31st.
Purchase employment-related assets before year-end
Employees are entitled to claim tax depreciation called Capital Cost Allowance (CCA) on only three types of assets—automobiles, aircraft and musical instruments—if conditions are met. If you’re entitled to deduct CCA and you’re considering purchasing a new asset, you should do so prior to the end of the year. This will accelerate CCA claims by one year. The asset must actually be available for your use to qualify for a CCA claim. In addition, specified tradespersons can qualify for a tax deduction of up to $500 for tools they purchase, and a deduction for tools purchased by qualified apprentices is also available. There are conditions that must be met for both deductions.
Review tax-free gifts, awards and social events
As an employee, you can receive two non-cash gifts a year from your employer on a tax-free basis for special occasions, such as Christmas, Hanukkah, a birthday or a similar event can receive two non-cash gifts a year from your employer on a tax-free basis for special occasions, such as Christmas, Hanukkah, a birthday or a similar event. Similarly, you can receive two non-cash awards a year from your employer, on a tax-free basis, in recognition of employment achievements such as reaching a set number of years of service or similar milestones. In both cases, the total cost of the gifts or awards to the employer, including taxes, must not be more than $500 per year. Where the cost of each gift or award exceeds $500, the full fair-market value of the gift or award will be included in your income. Where the total cost of the gifts or the total cost of the awards (maximum of two each) is more than $500, the fair market value of one or more of the gifts or awards will be included in your income. The employer can deduct the cost of the awards.
This policy should make it somewhat easier for employers to administer their gift and awards programs, as it will generally remove the need to determine the fair market value of small, non-monetary gifts and awards where they are within the limitations noted above. Note that this policy does not apply to certain gifts and awards. For example, this policy does not apply to cash or near-cash gifts and awards which may include gift certificates or any item that can easily be converted to cash—the value of these gifts and awards will be considered a taxable employment benefit. For more information on gifts and awards that the CRA considers to be taxable employment benefits and not covered by their policy above, contact your BDO advisor.
The CRA also has a policy concerning work-related social events. If your employer provides free parties or other social events to all employees and the cost is not more than $100 per person, this will not be considered a taxable benefit to you. Note that ancillary costs such as transportation home will increase the $100 per person amount. If the cost of the party is greater than $100 per person, the entire amount including the ancillary costs will be a taxable benefit and included in your income.
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