MISCELLANEOUS EMPLOYEE BENEFITS
Employers often provide various miscellaneous benefits to their employees, ranging from health and safety measures to work-related reimbursements. The Canada Revenue Agency (CRA) outlines specific rules to determine whether these benefits are taxable or non-taxable. Below is an overview of some common miscellaneous benefits and their tax implications.
Health and Safety Benefits
- COVID-19 Testing: Employer-provided COVID-19 testing is generally non-taxable if it is required for work purposes or to ensure employee safety.
- Identity Theft Protection: Non-taxable if the employer pays for services to protect employees from identity theft risks associated with their employment.
- Criminal Background Checks: Non-taxable if conducted as part of the hiring process or required for the employee’s position.
Work-Related Expenses and Reimbursements
- Licensing and Testing Fees: Fees paid by the employer are non-taxable if incurred as a condition of employment or for upgrading skills related to the job.
- Rental Cars: Reimbursement for rental cars is non-taxable if used for work-related travel between temporary office locations or accommodations.
- Legal Expenses: Legal fees paid by the employer are taxable unless they directly benefit the employer and are not personal to the employee.
Sports Clubs and Recreational Benefits
- Sports Clubs: Payments or allowances provided to employees for membership in sports clubs, such as golf or hockey clubs, are generally taxable benefits unless directly related to work activities. Examples include:
- Memberships provided as part of an employer-hosted networking or business event may be non-taxable if they are directly tied to business purposes.
- Allowances for recreational memberships unrelated to work are considered taxable.
- Recreational Facilities: Facilities owned or leased by the employer and primarily used for employee wellness programs may not be taxable if personal use is incidental.
Employee Perks
- Crowdfunding Contributions: The taxability of contributions depends on whether the funds are received personally or through the employer. Personal contributions may be taxable, while employer-supported efforts may have different rules.
- Leased Vehicles: A taxable benefit arises when the employee leases a vehicle from the employer, calculated as the fair market value (FMV) of the vehicle minus the purchase price.
Employer Responsibilities
- Determining Taxability: Employers must assess the purpose of the benefit to determine whether it is taxable or non-taxable under CRA guidelines.
- Reporting and Deductions: Taxable benefits must be included in the employee’s income, with appropriate deductions for income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.
- T4 Reporting: Taxable benefits must be reported on the employee’s T4 slip.
Additional Resources
