Which Employee Benefits Are Taxable?

A couple of weeks ago, the financial news of the day involved a controversy about the taxation of employee benefits. CRA was enforcing its interpretation of the law in relation to the taxation of the benefit of receiving employee discounts at work. After a political outcry, CRA backed down, leaving several question marks.

That’s regrettable because tax law must be certain – up front – in order for employers to properly fill out T4 slips and communicate the net after-tax value of employee remuneration.  It’s not possible to try to anticipate how CRA is going to interpret a law afterwards, and it’s unfair for employees to face unintended consequences in an audit many years later.

Based on where the law stands today, here’s a list of a dozen and a half taxable and tax-free benefits to consider in determining compensation for employees for 2017, excerpted from Family Tax Essentials. Business owners should discuss these and other perks of employment with their tax and bookkeeping specialists as part of their year end planning meetings:

Perks of Employment

Taxable Benefits*:

  • Personal use of employer’s vehicle
  • Gifts in cash or those that exceed $500
  • Value of holidays, prizes and awards
  • Merchandise discounts – below cost
  • Premiums for a provincial health or hospital plan
  • Tuition paid for courses for personal benefit
  • Interest-free and low-interest loans
  • Group sickness, accident or life plans
  • Gains and income under employee stock-option plans

Tax-Free Benefits:

  • Recreational facilities, including social or athletic club memberships
  • Non-cash gifts under $500;
  • $500 or more for birthdays, anniversaries. Annual $1000 total.
  • Employee counselling services for health, retirement or re-employment
  • Merchandise discounts – above cost
  • Premiums for a private health plan or lump-sum wage-loss replacement plan
  • Tuition paid for courses for the employer’s benefit
  • Certain moving expenses if required by the employer
  • Employer’s required contribution to provincial health and medical plans
  • Employer-paid costs of attendant for disabled employees or to cover away-from-home education due to work in remote worksites

* If these amounts include GST/HST, employees who are allowed to claim employment expenses may be able to claim a rebate on Line 457 by filing form GST370. If you receive this rebate, claim it as income in the following tax year on Line 104.

Evelyn Jacks is Founder and President of Knowledge Bureau and author of 52 books on the subject of tax planning, preparation and family wealth management.

Additional educational resources: Advanced Family Tax Preparation Course, CE Summits

Posted under: Income Tax

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