Claim amount increased to $23 from $17 per meal, for a total of $69/day
Ensure that allowances paid are reasonable. If they are determined unreasonable, the full allowance could be taxable
In a May 15, 2020 Federal Court of Appeal case, the Court reviewed whether various allowances paid to employees of the taxpayer were subject to CPP and EI. This required determining whether the allowances were taxable. The Tax Court of Canada had previously ruled that some of the allowances were partially taxable, while others were either fully taxable or fully non-taxable. At issue in this case was whether an allowance could be partially taxable or whether being in excess of a “reasonable amount” resulted in the allowance being entirely taxable.
Taxpayer loses
After reviewing the exclusion of reasonable travel allowances from income rules, the Court concluded that the entire allowance is excluded from income if it is reasonable, or fully included in income if it is unreasonable. It cannot be partially taxable. As the allowances in question exceeded a reasonable amount, they were entirely taxable.
ACTION ITEM: It is extremely important to ensure that allowances paid are reasonable. If they are determined to be unreasonable, even if by the thinnest of margins, the full allowance could go from non-taxable to taxable. Consult with a specialist to ensure that they are comfortably reasonable.
CRA released the promised guidance for employment expenses incurred by shareholder-employees to be deductible:
For an employee to deduct travel or motor vehicle expenses against employment income, the employee must be normally required to work away from the employer’s place of business, be required to pay the travel expense under the contract of employment, and have a signed and completed T2200. Also, the employee cannot receive an allowance excluded from income.
In 2017, CRA began denying travel expenses claimed on the personal tax return of many employees who were also shareholders of the employer or related to a shareholder. After receiving concerns from stakeholders regarding this new assessing practice, CRA reversed their assessments, indicating that “clear guidelines for taxpayers and their representatives” were important to the Canadian self-assessment system and that additional consultation and guidance was needed in this area.
In September of 2019 CRA released the promised guidance. It noted that the following conditions had to be met for employment expenses incurred by shareholder-employees to be deductible:
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The expenses were incurred as part of the employment duties and not as a shareholder.
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The worker was required to pay for the expenses personally as part of their employment duties.
When the employee is also a shareholder, the written contract may not be adequate, and the implied requirements may be more difficult to demonstrate. However, CRA noted that both of these conditions may be satisfied if the shareholder-employee can establish that the expenses are comparable to expenses incurred by employees (who are not shareholders or related to a shareholder) with similar duties at the company or at other businesses similar in size, industry and services provided.
ACTION ITEM: Instead of deducting amounts against employment income, consider whether it would be better for the company to reimburse expenses of shareholder-employees, or perhaps, pay a tax-free travel allowance. If amounts will continue to be paid personally, retain support that shows how the travel expenditures are reasonable as compared to those of other similar arm’s length workers.
Produce a T2200 which indicate that motor vehicle expenditures were requirements of employment with records such as repair receipts
In a September 17, 2019 Tax Court of Canada case, at issue was the deductibility of vehicle expenses, and in particular, the portion of total vehicle use that was for employment purposes. While initially challenged by CRA, the Court eventually accepted the credit card statements as support for the amounts expended. The taxpayer held and produced a T2200 which indicated that motor vehicle expenditures were requirements of employment.
Taxpayer loses – vehicle expenses
The taxpayer had initially claimed 90% employment usage but later asserted that only 1,015 of her total 1,353 kilometres travelled (75%) were for employment purposes. This percentage is used to determine the portion of total vehicle expenses that can be deducted. The Court then noted that the total kilometres driven for the year were more likely approximately 10,000 based on the odometer readings listed on the third-party garage repair invoices provided throughout the year. As the reported employment kilometres (which were supported by a vehicle log) were about 10% of the total reported on the invoices, only 10% of expenses were allowed.
ACTION ITEM: In addition to employment/business travel logs, CRA may ask for support of total travel. Retain records that support total kilometres traveled such as repair receipts.
The Department of Finance announced the climate action incentive payment amounts for 2020. The following amounts may be claimed on the 2019 personal tax returns:
On December 16, 2019, the Department of Finance announced the climate action incentive payment amounts for 2020. These payments are associated with the provinces that are subject to the federal backstop legislation. The following amounts may be claimed on the 2019 personal tax returns:
| Category | Ontario | Manitoba | Saskatchewan |
Alberta |
| Single adult/first adult in a couple | $224 | $243 | $405 | $444 |
| Second adult in a couple or first child of a single parent | $112 | $121 | $202 | $222 |
| Each child under 18 not already included above | $56 | $61 | $101 | $111 |
| Baseline example for family of four | $448 | $486 | $809 | $888 |
A 10% supplement is available for those that live in rural areas (communities outside of census metropolitan areas, CMAs).
The 2020 climate action incentive payment payable to eligible Albertans will reflect fuel charge proceeds generated over a 15-month period. This consists of three months (January – March 2020) with a carbon price of $20 per tonne, plus 12 months (April 2020 – March 2021) with a carbon price of $30.
Also note that no federal incentive payments will be available for residents of New Brunswick this year since it will introduce a provincial program commencing on April 1, 2020 which removes the applicability of the federal backstop legislation.
ACTION ITEM: Ensure that changes in family status (marriage, new children etc.) are included in your 2019 personal tax return to get the full benefit of the program. Also note that most other provinces have similar rebate/incentive programs in place.
Commuting employment expenses taxable? Can i deduct employment travel costs, job, business related travel cost from taxes?
In an August 15, 2019 Tax Court of Canada case, at issue was the deductibility of a number of employment expenses (primarily travel, lodging and motor vehicle expenses) incurred by the taxpayer. While the taxpayer resided in Ottawa, he signed an employment contract with a company based in Regina. The employment contract stated that the new employment position would be “based from our yet to be determined office in Ottawa, Ontario.” For the 2012 and 2013 tax years, the taxpayer shuttled by air between Ottawa and Regina weekly. In order to deduct travel costs incurred by the employee, the employee must have been required to travel away from the employer’s place of business.
The taxpayer argued that his home in Ottawa was a place of employment, and therefore, costs of travel between his work location in Ottawa, and the work location in Regina, were deductible as they were incurred in the course of employment.
Taxpayer loses, mostly
The Court rejected the taxpayer’s assertion, finding that the employer did not have a place of business in Ottawa. The Court observed that the fact that the employee might choose to “squeeze in” work (in this case on some Mondays or Fridays) at his home in Ottawa did not, without more, constitute the home being an employment location. Further, there were no photographs of the home office, testimony describing it, or home office expenses claimed. The Court stated that the employment contract did not alter its decision as there was no evidence that the employer made any effort to find an office in Ottawa, and no evidence related to work pertinent to Ottawa was provided.
As such, travel between Ottawa and Regina was personal, and the associated lodging and travel costs were denied.
The Court also reiterated that the appeal was considered without regard to the distance between the employee’s home and the employer assigned office: the two locations could be in the same municipality or different provinces. In other words, commuting to work, no matter how far, is considered personal. However, note that there are some exceptions to this rule, such as where the individual travels to a temporary special work site, or a remote work location.
ACTION ITEM: If considering the acceptance of employment that requires significant commuting, consider that the commuting costs likely will not be deductible.
The Court upheld the previous Tax Court decision which classified an employer-provided parking pass as a taxable benefit to an employee of an airline
In a June 10, 2019 Federal Court of Appeal case, the Court upheld the previous Tax Court decision which classified an employer-provided parking pass as a taxable benefit to an employee of an airline. However, in doing so, the Court provided differing reasons which may affect employees in all sectors.
Taxpayer loses
In the previous Tax Court case, the argument focused on whether the primary beneficiary of the pass was the employer or the employee. However, in this decision, the Federal Court of Appeal stated that the ultimate goal should be determining whether the employer conferred something of economic value on the employee. The determination of whether the employee was the primary beneficiary is useful in determining whether an economic benefit was conferred but is not the ultimate test in and of itself. Instead, the factors weighed in the primary beneficiary test may help determine that there was only incidental or no personal economic benefit, in which case it would not be a taxable benefit.
The Court also noted that the fact that the good or service provided is necessary for the discharge of employment-related activities is relevant in drawing an inference about whether it is also providing a personal benefit to employees. Basically, if the benefit provided is necessary for the employee to do their job, it is less likely personal.
Since having the employee’s car at work was not necessary to, or required by, the employer, the Court determined that the cost of parking was a personal expense and, therefore, a personal benefit.
ACTION ITEM: This case may result in a change in CRA assessing policy. Benefits not previously taxed may need to be reviewed in the upcoming year to determine if they are now taxable.
Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget
On April 17, 2019, Transport Canada released details on the purchase incentive of up to $5,000 for zero-emission vehicles as originally proposed in the 2019 Budget.
The incentive will apply to new purchases or leases on or after May 1, 2019. To receive the incentive, the manufacturer’s suggested retail price must be less than $45,000 for vehicles with six or fewer seats, while a vehicle with seven or more seats must have a suggested retail price of less than $55,000. Higher priced versions (trims) up to $55,000 (six or fewer seats) or $60,000 (seven or more seats) will also qualify. Delivery, freight and other fees, such as vehicle colour and add-on accessories, which push the actual purchase price over these limits will not result in the incentive being lost.
The full $5,000 incentive will be available for eligible battery electric, hydrogen fuel cell, or longer range plug-in hybrid vehicles (battery capacity of 15 kWh or more), while shorter range plug-in hybrid vehicles will be eligible for a $2,500 incentive.
Leases of 48 months or more qualify for the full incentive, with reduced amounts available for shorter leases. It will be reduced to 75% for a minimum 36-month lease, 50% for a minimum 24-month lease, or 25% for a minimum 12-month lease.
The purchase incentive will be applied at the point of sale (i.e. at dealerships or online) directly on the bill of sale or lease agreement of eligible vehicles.
The dealership is responsible for completing the documentation required to receive the incentive. Claims can be submitted through the Transport Canada online portal. Funding will be provided on a first-come, first-serve basis.
Individuals can only get one incentive per year. Businesses (including NPOs and provincial, territorial and municipal governments) can get up to ten incentives per year.
As an alternative to receiving the cash incentive, a temporary enhanced first-year capital cost allowance (CCA) rate of 100% may be claimed by those using the vehicle for income earning purposes. Specific restrictions and conditions apply. The deduction may be restricted to the first $55,000 in cost depending on the size, seating, and use of the vehicle.
ACTION ITEM: Review the Transport Canada website to determine if a future vehicle purchase would be eligible. The website includes a list of eligible vehicles and responses to frequently asked questions. https://www.tc.gc.ca/en/services/road/innovative-technologies/zero-emission-vehicles.html