Failure to report your personal usage of company vehicles may result in tax penalties
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. The key word here is “available”, the standby charge applies regardless of whether the vehicle supplied is primarily for business use or personal use.
Operating cost benefit: Relates to the operating expenses paid for your personal use of the vehicle. For example, gas, licenses, insurance, repairs, etc.
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:
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.
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:
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.