Failure to report your personal usage of company vehicles may result in tax penalties

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In General

Do you have a company car? The personal use of an employer provided vehicle is considered a taxable benefit and should be reported to the CRA.

“Personal use” defined:

What is considered “personal use” of a company vehicle? Such rule is applied when:

  • A company owned vehicle is made “available” to an employee or a person related to the employee. However, certain vehicles are not included (taxis, buses, vans, etc).
  • The automobile is used for personal driving. Person driving includes travel between home and work, vacation trips, driving for personal activities, etc.

Taxable automobile benefit:

The aforementioned taxable benefit can be broken down into two types: a standby charge and an operating cost benefit.

Standby charge: It represents the benefit employees enjoy when an employer’s automobile is available for their personal use.[1] The key word here is “available”, the standby charge applies regardless of whether the vehicle supplied is primarily for business use or personal use.[2]

Operating cost benefit: Relates to the operating expenses paid for your personal use of the vehicle. For example, gas, licenses, insurance, repairs, etc.[3]

The Automobile Benefits Online Calculator on the CRA website allows you to calculate the estimated automobile benefit based on the information you provide. To use the calculator, follow this link:

http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/bc-eng.html

How to report your automobile benefit:

Your automobile benefit has to be included on your T4 slip. Report the value of the benefit including the GST/HST that applies in box 14, “Employment income,” and in the “Other information” area enter code 34 at the bottom of the employee’s T4 slip.[4]

Failure to report your automobile benefit:

If you fail to report your automobile benefit in your tax return, you may be deemed to have made a false statement or omission, either knowingly or negligently. The resulting penalty is calculated as the greater amount of $100 and 50% of the tax understated. For more information, please follow the link below:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/ntrst/menu-eng.html

 

If you have any questions or concerns about your automobile benefits, please feel free to give us a call. We would be happy to help you.

 

 

 

 

 

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