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Flashcards in unit 5 taxable benefits - NEED MORE Deck (23):

What are the categories of benefits

1. Taxable
2. Taxable but not insurable
3. Non-Taxable


define taxable

if the benefit amount is taxable the it is also pensionable (CPP)
- therefore it must be included in taxable income BEFORE deductions are subtracted
- it may or may not be subject to EI premiums


define taxable but not insurable

the benefit amount is NOT subject to employment insurance premiums


define non-taxable

the benefit amount is NOT included in the calculation of employee's pay


what is the most common NON-taxable benefit in Ontario

health and dental premiums
other benefits are usually taxable and subject to CPP


What about benefits that are cash, near cash or non-cash

Paid in cash - usually insurable unless the employment is not insurable
Near-cash and noncash benefits - when taxable are not insurable but they are pensionable


define cash benefit

a benefit you pay to your employee in cash such as a tool allowance


define near cash benefits

this is something you give to your employee that is easily converted into cash such as a gift card


define non-cash benefit

this a benefit you provide your employee that has a fair market value but cannot be converted into cash such as term life insurance


when should benefits be taxed

in the period they are enjoyed
if you provide term life insurance it should be taxed on their pay each pay


where can you find a chart that can be used to determine if a benefit or allowance is pensionable and /or insurable as well as what box it needs to be recorded in on T4

at the back of the T4130 guide there is a chart


automobile and motor vehicle benefits and allowances
what is important to note about it

always refer to the T4130 guide to see if taxable
this is an extensive subject


Determining whether or not an automobile (vehicle) benefit and allowance is taxable, you must first determine what

if the vehicle falls into the category of what CRA deems an automobile
(ie. ambulance is not deemed an automobile)


What is CRA's definition of an automobile?

a vehicle that can carry up to 8 passengers and the driver and is meant to be driven on roads and highways.


When is an automobile (considered as such from CRA) taxable benefit

when used for personal driving as well


what are the components that go into the calculation of a taxable benefit for automobiles

1. availability of vehicle to the employee
2. employee to keep track of number for km for employment and personal use
3. standby charge and operating expenses - less any reimbursement from the employee


how do you calculate the standby charge

2%x (cost of automobile + taxes) x availability


when can an employee have a reduced standby charge

only when the personal kilometers are 1667 or less AND if the vehicle is used more than 50% for business


How do you calculate the operating expense

personal km x .54 for first 5000km and .48 for additional)


what is the other method for calculating the operating expense

operating cost benefit calculation method


What are some facts about using the operating cost benefit calculation method

standby charge is included in employee's income, the vehicle must be used for more than 50% OF THE TIME FOR BUSINESS AND IT MUST BE REQUESTED BY THE EMPLOYEE IN WRITING


how do you calculate the optional method



how do you calculate availability
ex. during the month of July, the employee drove back and forth to work for a total of 21 days at 30 km per trip

# of km the employee uses by the fixed rate
30 km x 2 = 60 x 21 days =