Canadian Employer Supplied Automobile Standby Charge and Benefit

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By popular demand many of you have requested a simple explanation for calculating the automobile standby charge for personal use of an employer supplied automobile.  Are you ready for some really technical stuff?

There are several components to the taxable benefit derived from the personal use of the employer paid automobile…

car

1)      Define an automobile – sounds simple but it’s really not.  According to CRA (Canada Revenue Agency) an automobile is a passenger vehicle, which does not include a bus, ambulance, police car, hearse, or utility van.

2)      Define personal KMs driven – driving from home to work or from work to home

          Driving to visit a client but stopping for coffee, a haircut, drop off to the dry cleaners, doing groceries, etc.

          Week end use to go out on the town or drive to the cottage

3)      Costs if the automobile – purchase or lease cost plus PST, GST or HST (depending on the province of employment

          Maintenance and repairs of the vehicle

          DOES NOT include insurance

4)      Number of 30 day periods the car was at the employees disposal – as long as they have the keys and the car is at their disposal, then these days count even if on vacation or away on business

5)      Is the car leased or owned by the company

6)      Did the employee reimburse the company for any personal KMs driven?  It could be through a payroll deduction each period or a lump sum payment at the end of the year.

 

  • Defining the vehicle is easy…is it a passenger car, SUV, van?  If so, then you are providing a passenger vehicle to your employees.
  • Personal KMs driven are determined by the events that are not business related as stated above (plus many, many more examples).  While it is not mandatory anywhere but in Quebec, it will be in the very near future.  You should enforce having your employees maintain a daily travel log which includes:

              Starting odometer reading per day

               KMs driven for client visitssign

               Who the client is

               Client address

 

Please note that if audited both CRA and RQ (Quebec Revenue Agency) will require the log to be produced.

  • The cost of the vehicle is also quite easy.  You know how much you paid for or leased the vehicle for.  Any of your sales documents will show you the full price you pay for the vehicle
  • The number of 30 day periods is a simple calculation that turns the number of days the car was at the employee’s disposal into the number of periods
    • For example the employee received the car on July 1
    • The car was available up to and including December 31
    • The total number of days the car was at his disposal = 184

                184 (days avail) ÷ 30 (days per period) = 6.133

                Total # of 30 day periods = 6

STANDBY CHARGE

To calculate the standby charge for a company owned vehicle the formula never changes

2% x (purchase price + taxes) x # of 30 day periods – employee reimbursement

                Purchase price = $34,000.00

                HST = 13%

                # of 30 day periods = 6

                Employee Reimbursement = $1000

               {2% x (34,000+4420)  x  6} – 1000 =$3,610.40 Standby Charge

To calculate the standby charge for a company leased vehicle the formula never changes

2/3 x (lease price + taxes) x # of 30 day periods – employee reimbursement

                Lease price = $367.00 per month

                HST = 13%

                # of 30 day periods = 6

                Employee Reimbursement = $1000

               {2/3 x (367.00+47.71)  x  6} – 1000 =$658.84 Standby Charge

OPERATING COSTS

Operating costs include items like fuel, maintenance, licences and insurance

This is the simplest calculation – 24¢ per personal KM driven

               Personal KM = 1300

              1300  x 24¢ = $312.00 Operating Costs

 The total Taxable Benefit incurred by the employee is 658.84 + 312 = $970.84

This amount is reported in Box 14 and 34 of the T4.

www.cra.gc.ca/autobenefits-calculator

Here’s to helping you better understand what’s in your pocket

Until next time.

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