Automobile provided by the employer
You may be looking for:
- Automobile or motor vehicle benefits – Allowances or reimbursements provided to an employee for the use of their own vehicle
- Motor vehicle provided by the employer
Content has been updated for clarity, completeness and plain language. No changes were made to the current CRA administrative policy.
You may provide an automobile to your employee to use in performing their duties of office or employment. Generally, the benefit from personal driving of the employer provided automobile is a taxable benefit.
What is included in the term employee
This information may apply to the following, even though it is specific to an employee:
- a person who does not deal at arm’s length with the employee
- an individual who holds an office or a person who does not deal at arm’s length with that individual
- a partner or a person related to the partner
- a shareholder or a person related to the shareholder
On this page
Steps
Determine if the vehicle is an automobile
The Income Tax Act defines automobiles and motor vehicles differently for tax purposes.
Answer a few questions to determine if the vehicle is an automobile or a motor vehicle.
Automobile and motor vehicle definitions
The difference between an automobile or a motor vehicle depends on:
- Seating capacity
- Type of vehicle
- Primary use of the vehicle
- Automobile
An automobile is a motor vehicle that is designed or adapted mainly to carry individuals on highways and streets, and has a seating capacity of not more than the driver and eight passengers. A zero-emission passenger vehicle (ZEPV) is also considered an automobile.
Learn more: ZEPV - What kind of vehicle do you own?
Does not include
An automobile does not include:
- An ambulance
- Clearly marked police or fire emergency response vehicles
- Clearly marked emergency medical response vehicles that you use to carry emergency medical equipment and one or more emergency medical attendants or paramedics
- A motor vehicle you bought to use primarily (more than 50% of the distance driven) as a taxi, a bus used in a business of transporting passengers, or a hearse in a funeral business
- A motor vehicle you bought to sell, rent, or lease in a motor vehicle sales, rental, or leasing business, except for benefits arising from personal use of an automobile
- A motor vehicle (other than a hearse) you bought to use in a funeral business to transport passengers, except for benefits arising from personal use of an automobile
A van, pickup truck, or similar vehicle that meets either of the following criteria:
- Can seat no more than the driver and two passengers, and in the year it is acquired or leased is used (50% or more of the distance driven) to transport goods or equipment in the course of business
- In the year it is acquired or leased, it is used (90% or more of the distance driven) to transport goods, equipment, or passengers in the course of business
Pickup trucks that you bought or leased in the tax year that meet both of the following criteria:
- Are used (50% or more of the distance driven) to transport goods, equipment, or passengers in the course of earning or producing income
- Are used at a remote work location or at a special work site that is at least 30 kilometres away from any community having a population of at least 40,000
If the back part or trunk of a van, pickup truck, or similar vehicle has been permanently altered and can no longer be used as a passenger vehicle, it is no longer considered an automobile as long as it is used primarily for business.
- Motor vehicle
A motor vehicle is an automotive vehicle designed or adapted for use on highways and streets. It does not include a trolley bus or a vehicle designed or adapted for use only on rails. Although an automobile is a kind of motor vehicle, the CRA treats them differently for income tax purposes.
Zero-emission vehicles are cars and trucks powered by rechargeable electric batteries or hydrogen fuel cells.
If the vehicle is a motor vehicle and is not a automobile based on the above definitions, do not continue to next step.
Refer to: Motor vehicle provided by the employer.
- If the vehicle is an automobile and is not a motor vehicle, continue to: Step 2 - Determine if you made the automobile available to your employee.
Determine if you made the automobile available to your employee
An automobile is available to your employee if your employee has access to or control over the automobile. This includes if your employee used the automobile in the following situations:
- Any part of a day, weekends and holidays during the calendar year
- The whole day, part of the day, or even if it just stays unused in their garage, driveway, or parking spot
If you made an automobile available to your employee, your employee must keep a logbook or daily record of the trips made with the automobile. Step 5 provides more information about the records (logbook) your employee must keep to help you determine the number of personal and business (employment-related) kilometers driven if you determine the benefit is taxable.
If you did not make the automobile available to your employee, there is no taxable benefit to calculate.
Do not continue to next step.
- If you made the automobile available to your employee, continue to: Step 3 - Determine if the automobile was used for personal driving.
Determine if the automobile was used for personal driving
Personal driving is any driving of an automobile that is done for purposes not related to their employment. This includes driving between home to a regular place of employment.
If your employee does not use the automobile for any personal driving, there is no taxable benefit, even if the automobile is available to your employee for the entire year. This applies as long as the kilometres driven by your employee were in the course of their employment duties and the automobile is returned to your premises at the end of their work day.
What is a regular place of employment
The CRA considers a regular place of employment to be any location where your employee regularly:
- Reports for work
- Performs their employment duties
"Regularly" means there is some degree of frequency or repetition in your employee’s reporting to that particular work location in a period (weekly, monthly or yearly). This does not need to be your establishment. An employee can have multiple regular places of employment.
Generally, any travel by your employee between home and a regular place of employment is considered personal driving.
Examples of a regular place of employment
A regular place of employment may include:
- The office where your employee reports daily
- Several store locations that a manager visits monthly
- A client’s premises when your employee reports daily for a 6 month project
- A client’s premises when your employee attends biweekly meetings
What are the exceptions for transportation to a regular place of employment in specific situations
The benefit may not be taxable where you provide your employee with transportation to a regular place of employment in one of the following situations:
- You need to provide your employee with transportation from pickup points to an employment location where public and private vehicles are neither allowed nor practical at the location because of security or other reasons
- You need to provide transportation to your employee who works in remote locations
- You need to provide transportation to your employee who works at special work sites, including prescribed zones
What if your employee drives to multiple regular place of employment during the same day
Depending on the situation, your employee may have more than one location where they regularly report for work. The CRA considers that if your employee drives to multiple regular places of employment in a day, the following is considered personal driving:
- Between your employee’s home and their first work location
- Between the final work location and your employee’s home
Any other travel by your employee between regular places of employment is considered business (employment-related) driving.
What is a point of call
The CRA considers a point of call any location other than a regular place of employment where your employee goes to perform their employment duties.
Generally, any travel by your employee between home and a point of call is considered business (employment-related) driving, if you need or allow your employee to travel directly from home to a point of call, or return home from that point. In order for the travel to be considered business (employment-related) driving, it must be reasonable that your employee’s travel to the point to call be made at that time and on the way to or from work.
If the travel is not reasonable, it is considered personal driving.
Personal driving examples
- Vacation trips
- Driving to conduct personal activities
- Travel between home and a regular place of employment other than a point of call
- Travel between home and a regular place of employment even if you insist your employee drives the vehicle home, such as when your employee is on call
Business (employment-related) driving examples
- Travel between your employee’s regular place of employment and a client’s workplace (a point of call)
- Travel for business purpose errands
- Travel between home and a point of call, such as:
- Salesperson visiting customers
- Going to a client’s premises for a meeting
- Making a repair call
Examples - Difference between when an automobile is made available for personal and business (employment-related) driving
Examples of when an automobile is made available Examples Result Employee is a customer service representative who works for a local telephone company. The company provides the employee with an automobile, car 333. At the beginning of each work day, the employee uses car 333 to conduct the service visits assigned to them. At the end of each day, the employee returns car 333 to the company’s parking lot and returns the keys to the employer.
The benefit is not taxable to the employee because:
- The automobile is made available during working hours
- The automobile is only used for business (employment-related) purposes
Employee is a regional manager for the same telephone company. Unit 222 is assigned to the employee. One of the requirements of the employee’s position requires them to travel abroad on a regular basis. As a result, the employee keeps the keys to the automobile throughout the year. When travelling abroad, the employee leaves unit 222 at the airport. The employee also uses the vehicle to travel between their home and their workplace.
The benefit from personal driving is taxable to the employee because:
- The automobile is made available to the employee
- The automobile is used for business (employment-related) and personal purposes
As a work incentive, the employer makes an automobile available to an employee’s spouse, to be driven for personal use.
The benefit from personal driving is taxable to the employee (not the spouse) because:
- The automobile is made available to a person not dealing at arm’s length with the employee (the spouse)
If there is no personal driving, the use of the employer-provided automobile is not a taxable benefit.
Do not continue to next step.
If there is personal driving, the use of the employer-provided automobile is a taxable benefit.
Continue to: Step 4 - Determine if the automobile benefit is taxable.
Determine if the automobile benefit is taxable
Non-taxable situation
If you make an automobile available to your employee (step 2) because of their current, previous, or intended office or employment, the benefit is not taxable if all of the following (step 3) apply:
- There is no personal driving
- Use of the automobile is only in the course of their employment duties
- The automobile was returned to the premises of the employer at the end of the work day
Taxable situation
If you make an automobile available to your employee and they use the automobile for both business (employment-related) and personal driving , the personal driving is taxable.
Generally, the taxable benefit for an automobile you provide is:
- Standby charge benefit for the year related to the availability and personal driving for an automobile you own or lease
- plus Operating expense benefit for the year when you pay the operating costs of an automobile subject to a standby charge
- minus Any amounts your employee reimbursed you for the standby charge or the operating expenses
- equals Value of the automobile benefit to be included on the T4 slip
What is a standby charge benefit
A standby charge is for the benefit your employee gets when your owned or leased automobile is made available for their personal use. Any reimbursements you receive from your employee, other than expenses relating to the operation of the automobile, will decrease the standby charge.
If your employee meets all conditions in:
- Step 6, you can calculate using reduced standby charge calculation.
- Step 7, you can calculate using the simplified standby charge calculation.
What is an operating expense benefit
When you (or a person related to you) provide an automobile to an employee and pay for the operating expenses related to personal use (including the GST/HST and PST), this payment is a taxable benefit to the employee.
If the conditions met in step 12 are met, you can calculate the benefit using an optional calculation. Otherwise, the benefit is calculated using the fixed rate.
Example of operating expenses
Includes:
- Fuel
- Oil
- Maintenance costs, minus insurance proceeds
- All repair costs, minus insurance proceeds
- Licenses
- Insurance costs, etc.
Does not include
- Interest
- Capital cost allowance (CCA) or leasing costs
- Parking expenses, highway or bridge tolls
If the benefit is not taxable, you do not need to do any calculations.
Do not continue to next step.
- If the benefit is taxable, continue to: Step 5 - Review the records (logbook) to determine the number of personal and business (employment-related) kilometers driven.
Review the records (logbook) to determine the number of personal and business (employment-related) kilometers driven
If you make an automobile available to your employee, they must keep a logbook or daily record of the trips made with the automobile.
The logbook or daily record will support your calculation of the vehicle benefit and any expenses your employee will claim. They must give you a copy.
Logbook - Detailed records
Your employee should record the details of the use of the vehicle, such as the following information in a logbook or daily record:
- Total number of days that the vehicle was made available to them during the year
- Total number of kilometres travelled for business (employment-related) and personal driving (on a daily, weekly or monthly basis) during the number of days that the vehicle was made available
Learn more on what to include in a logbook: Motor vehicle records
If no record was kept or is no longer available, you must be able to reasonably account for the number of personal and business (employment-related) kilometers driven to use the reduced standby charge calculation.
If no record is kept or is no longer available, your employee may be eligible to use the simplified standby charge calculation.
Continue to: Step 7 - Determine if your employee is eligible for the simplified standby charge calculation.
If your employee kept the detailed records and you received a copy, your employee may be eligible for the reduced standby charge.
Continue to: Step 6 - Determine if your employee is eligible for the reduced standby charge.
Determine if your employee is eligible for the reduced standby charge
Using the information from the records you received from your employee, you need to determine if you can use the reduced standby charge calculation.
Your employee is eligible for the reduced standby charge if all of the following conditions apply:
Condition 1: You required your employee to use the automobile in connection with or in the course of an office or employment
If you did not require your employee to use the automobile as part of their duties of an office or employment, your employee is not eligible for the reduced standby charge.
Continue to: Step 7 - Determine if your employee is eligible for the simplified standby charge calculation
If you required your employee to use the automobile as part of their duties of an office or employment, the benefit meets one of the conditions for the reduced standby charge.
Continue to: Condition 2: More than 50% of the distance travelled is for business (employment-related) driving
Condition 2: Your employee used the automobile more than 50% of the distance driven for business (employment-related) driving
You need to determine if your employee uses the automobile more than 50% of the distance driven for business (employment-related) driving. Use the following to calculate the share of the distance driven for business (employment-related) driving:
- Kilometres driven for business (employment-related) driving
- divide by Total kilometres driven for business (employment-related) and personal driving
- equals Result
- multiply by 100
- equals This is the % of kilometres driven for business (employment-related) driving
Calculation example
An automobile is made available to Judith by her employer 150 days of the year. Judith was required to use the automobile in connection with her employment and is also allowed to use the automobile for personal driving. In reviewing her travel logbook, you found that she drove 5,500 km for personal driving out of a total of 27,525 km.
- 22,025 is the kilometres driven for business (employment-related) driving
- divide by 27,525 is the total kilometres driven for business (employment-related) and personal driving
- equals 0.80 is the result
- multiply by 100
- equals 80% is the percentage of kilometres driven for business (employment-related) driving
Because Judith drove the automobile more than 50% of the time for business (employment-related) driving, her driving meets the second condition for using the reduced standby charge.
If the automobile is driven 50% or less for business (employment-related) driving, your employee is not eligible for the reduced standby charge.
Continue to: Step 7 - Determine if your employee is eligible for the simplified standby charge calculation
If more than 50% of the distance travelled is for business (employment-related) driving, the benefit meets the one of the conditions for the reduced standby charge.
Continue to: Condition 3: Number of kilometres of personal driving is within the limit for the reduced standby charge
Condition 3: Determine if the number of kilometres of personal driving is within the limit for the reduced standby charge
The number of kilometres travelled of personal driving must not be more than one of the following:
- 1,667 km per 30 day period
- 20,004 km in the year
If your employee does not meet all of the conditions, your employee is not eligible for the reduced standby charge calculation.
Continue to: Step 7 - Determine if your employee is eligible for the simplified standby charge calculation.
If your employee meets all conditions, your employee is eligible for the reduced standby charge calculation.
Continue to: Step 8 - Determine which method to use to calculate the benefit.
Determine if your employee is eligible for the simplified standby charge calculation
You can use the simplified calculation for the standby charge if all of the following apply:
- You own the automobile provided to your employee
- Your employee uses the same automobile throughout the year
- Your employee’s principal source of employment is not selling or leasing automobiles
- Your employee is not eligible for the reduced standby charge
If your employee does not meet all conditions, do not use the simplified standby charge calculation.
You must use the detailed standby charge calculation.
If your employee meets all conditions, calculate the standby charge using the simplified standby charge calculation.
Determine which method to use to calculate the benefit
Use any of the following methods to calculate the automobile standby charge and the operating expenses benefit:
- Automobile Benefits Online Calculator (ABOC) to easily calculate
- Continue to steps 9 to 11 to manually calculate the taxable benefit, which include calculation examples
- Form RC18, Calculating Automobile Benefits to manually calculate
Calculate the standby charge benefit
If you make an automobile available to your employee, you must calculate the value of the standby charge.
You need to calculate the standby charge benefit differently depending if you own or lease the automobile.
How to calculate the standby charge benefit using estimates during the year
During the year, calculate the value of the benefit using estimates. To obtain the amount you must add to your employee’s salary for a given pay period, you must divide the value of the benefit you have estimated by the number of pay periods in the year.
At the end of the year, you must calculate the value of the benefit related to an automobile using the actual number of personal kilometres travelled during the year.
What is included in the cost of the automobile you own
The cost of the automobile includes all of the following:
- Cost of the automobile when it was bought, including options and accessories, and the GST/HST and PST, but not including any reduction for a trade-in
- Cost of additions, including the GST/HST and PST, made to the automobile after it was bought (that you add to the capital cost of the automobile to calculate the deduction for depreciation)
Where the automobile was purchased from a non-arm’s length person, the cost is generally equal to the fair market value when it was bought, including options and GST/HST or PST.
What is not included
The cost of the automobile does not include specialized equipment you add to the automobile to meet the requirements of a disabled person or for employment (such as: cell phones, two way radios, heavy-duty suspension and power winches). They are not considered to be part of the automobile’s cost for purposes of calculating the standby charge.
How to calculate the cost of the automobile when used as part of an automobile fleet
During the year, when your employee uses an automobile that is part of an automobile fleet that you operate, the guidelines below apply for calculating the standby charge benefit.
- If an automobile is assigned to your employee from a fleet or pool on a long-term or exclusive basis, the cost of the automobile assigned to your employee should be used when you calculate the standby charge.
- If your employee uses more than one automobile and your fleet is mostly made up of similar automobiles, or if it can be grouped into a few similar groups, you can calculate the cost of the automobile based on the average cost of the group from which the automobile was provided to your employee.
You and your employee have to agree to this calculation method.
Example
In 20X5, Company Y business operated a fleet of 10 automobiles belonging to the employer, which had been grouped as follows:
Group A Group B 20X4 Ford Taurus $23,000 20X4 VW Jetta $34,000 20X3 Chrysler 300 $22,750 20X3 VW Passat $35,000 20X2 Subaru Tribeca $19,500 20X2 Honda Accord $33,000 20X1 Honda Civic $23,250 20X1 Cadillac $38,000 20X0 VW Golf $20,750 20X0 Chrysler 300 $35,000 Average cost: $21,850 Average cost: $35,000 If the automobile was provided to your employee from:
- Group A, use the average cost of $21,850 for the cost of the automobile in the standby charge calculation
- Group B, use the average cost of $35,000 for the cost of the automobile in the standby charge calculation
What is included in the cost of the automobile you lease
The cost of leasing the automobile includes the following:
- Total rental cost for the automobile.
- The total monthly leasing cost, which is the total lease cost (including any trade in amount, down payments, which are to be prorated over the life of the lease and added to the leasing cost, GST/HST and PST paid to the lessor under the leasing contract, but excluding insurance) divided by the number of months in the term of the lease. The total leasing cost is generally equal to its fair market value at the time the automobile is leased.
- Any associated costs, such as maintenance contracts, excess mileage charges, terminal charges less terminal credits.
Leasing costs do not include the liability and collision insurance costs.
What are lump-sum lease payments
Some lease contracts may contain clauses that reduce the monthly lease costs by requiring a substantial lump-sum payment at the start or end of the lease.
Lump-sum amounts you pay the lessor at the beginning or end of a lease that are not a payment to buy the automobile will affect the standby charge for the automobile.
Prorate the lump-sum payment you make at the beginning of a lease over the life of the lease and add it to the leasing cost.
Include the GST/HST and PST when making or receiving a lump-sum payment at the end of the lease, regardless of the calculation method you use.
Terminal charge - Lump-sum payment you made at the end of a lease
If you make a lump-sum payment at the end of a lease, the CRA considers the payment to be a terminal charge. This means your lease costs should have been higher and the standby charge for the automobile has been understated. In this situation, use one of the following methods:
- Add the terminal charge to the lease costs in the year you end the lease
- Prorate the payment over the term of the lease and amend the T4 or T4A slip of your employee who used the automobile, as long as they agree and can still ask for an income tax adjustment for the years in question
Your employee can send a request to the CRA to adjust their T1 income tax and benefit returns for those years.
Terminal credit - Lump-sum payment you received at the end of a lease
A lump-sum payment you receive from the lessor at the end of a lease is considered to be a terminal credit. This means the standby charge for the automobile has been overstated because the lease costs should have been lower. In this situation, use one of the following methods:
- Deduct the terminal credit from the lease costs in the year you end the lease
- Amend the T4 or T4A slip of your employee who used the automobile and provide a letter explaining the reduction, as long as your employee agrees and can still ask for an income tax adjustment for the years in question
Your employee can send a request to the CRA to adjust their T1 income tax and benefit returns for those years.
Simplified standby charge calculation
You own the automobile - Calculate the standby charge using the simplified calculation
Use the following to calculate the standby charge using the simplified calculation if all conditions in step 7 are met .
Use the following to calculate the standby charge if your employee is eligible for the simplified calculation:
- Cost of employer-owned automobile (including trade-in amount, additions, GST/HST and PST)
- multiply by 24%
- equals This is the amount for the standby charge benefit
- minus Any amounts your employee reimbursed you for the standby charge
- equals This is the value of the standby charge benefit which is a taxable benefit
Calculation example
In 2022, Matthew was required to use an automobile provided and owned by his employer in connection with his employment in Ontario. The cost of the automobile when it was bought, including options and accessories, and the HST was $50,000. His employment does not involve selling or leasing automobiles. The automobile was made available to Matthew throughout the year (365 days). In reviewing his travel logbook, you found that he drove 10,000 km for personal driving out of a total of 12,000 km. Matthew reimbursed you $500 for the standby charge.
- $50,000 is the cost of the employer-owned automobile
- multiply by 24%
- equals $12,000 is the amount for the standby charge benefit
- minus $500 is the amount Matthew reimbursed you
- equals $11,500 is the value of the standby charge benefit which is a taxable benefit
Detailed standby charge calculation
You own the automobile - Calculate the standby charge using the detailed calculation
Use the following to calculate:
Step A - Cost of the automobile multiplied by applicable percentage
Use the following to calculate the standby charge using the detailed calculation:
- Cost of employer-owned automobile
- multiply by 2%
- equals Result A - Cost of the automobile multiplied by applicable percentage
Step B - Number of days the automobile was available to the employee divided by 30 days
- Total number of days when the automobile was made available to your employee
- divide by 30 days
- equals Result B - Number of days the automobile was available to the employee divided by 30 days (rounded to the nearest whole number if it is greater than one)
Step C - Value of the standby charge benefit before the reduction
- Result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by Result A - Cost of the automobile multiplied by applicable percentage
- equals This is the value of the standby charge benefit before the reduced standby charge calculation
If your employee is not eligible for the reduced standby charge (step 6), continue to: Step G - Value of the standby charge which is a taxable benefit
If your employee is eligible for the reduced standby charge calculation (all conditions in step 6 have been met), continue to: Step D - Limit on the number of personal kilometres driven multiplied by Result B
Step D - Limit on the number of personal kilometres driven multiplied by Result B
- Result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by 1,667 km
- equals Result D - Limit on the number of personal kilometres driven multiplied by Result B
Step E - Application of the limit on the number of personal kilometres driven
- Total number of personal kilometres driven (step 6, condition 2)
- divide by Result D - Limit on the number of personal kilometres driven multiplied by Result B
- equals Result E - Application of the limit on the number of personal kilometres driven
Step F - Value of the reduced standby charge benefit
- Result C - Value of the standby charge benefit before the reduction
- multiply by Result E - Application of the limit on the number of personal kilometres driven
- equals This is the value of the reduced standby charge benefit
Step G - Value of the standby charge which is a taxable benefit
- Result F - Value of the reduced standby charge benefit
- minus Any amounts your employee reimbursed you for the standby charge
- equals This is the value of the reduced standby charge benefit which is a taxable benefit
Calculation example
In 2022, Judith was required to use an automobile provided and owned by her employer in connection with her employment in Ontario. The cost of the automobile when it was bought, including options and accessories, and the HST was $50,000. Her employment does not involve selling or leasing automobiles. The automobile was made available to Judith for 150 days during the year. She used the automobile for business (employment-related) driving 80% of the time. In reviewing her travel logbook, you found that she drove 5,500 km for personal driving (1,100 km per 30-day period) out of a total of 27,525 km. Judith reimbursed you $500 for the standby charge.
Step A - Cost of the automobile multiplied by applicable percentage
- $50,000 for the cost of employer-owned automobile
- multiply by 2%
- equals $1,000 is the result A - Cost of the automobile multiplied by applicable percentage
Step B - Number of days the automobile was available to the employee divided by 30 days
- 150 is the total number of days when the automobile was made available to your employee
- divide by 30 days
- equals 5 is the result B - Number of days the automobile was available to the employee divided by 30 days (rounded to the nearest whole number if it is greater than one)
Step C - Value of the standby charge benefit before the reduction
- 5 is the result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by $1,000 is the result A - Cost of the automobile multiplied by applicable percentage
- equals $5,000 is the value of the standby charge benefit before the reduced standby charge calculation
Step D - Limit on the number of personal kilometres driven multiplied by Result B
- 5 is the result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by 1,667 km
- equals 8,335 is the result D - Limit on the number of personal kilometres driven multiplied by Result B
Step E - Application of the limit on the number of personal kilometres driven
- 5,500 is the total number of personal kilometres driven (step 6, condition 2)
- divide by 8,335 is the result D - Limit on the number of personal kilometres driven multiplied by Result B
- equals 0.66 is the result E - Application of the limit on the number of personal kilometres driven
Step F - Value of the reduced standby charge benefit
- $5,000 is the result C - Value of the standby charge benefit before the reduction
- multiply by 0.66 is the result E - Application of the limit on the number of personal kilometres driven
- equals $3,300 is the value of the reduced standby charge benefit
Step G - Value of the standby charge which is a taxable benefit
- $3,300 is the result F - Value of the reduced standby charge benefit
- minus $500 is the amount Judith reimbursed her employee for the standby charge
- equals $2,800 is the value of the reduced standby charge benefit which is a taxable benefit
You lease the automobile - Calculate the standby charge using the detailed calculation
Use the following to calculate the lease cost for standby charge purposes if you lease the automobile:
Step A - Total monthly leasing cost of the automobile multiplied by the applicable fraction
Use the following to calculate the standby charge using the detailed calculation:
- The total lease cost, including down payment, trade-in amount, and taxes not included in monthly lease cost (excluding insurance)
- divide by Duration of lease (months)
- equals This is the prorated amount of the lump-sum lease payments
- plus Monthly payment to lessor, including associated costs, GST/HST and PST
- equals Total monthly leasing cost, including down payment, trade-in, and taxes (excluding insurance)
- multiply by 2/3
- equals Result A - Total monthly leasing cost of the automobile multiplied by the applicable fraction
Step B - Number of days the automobile was available to the employee divided by 30 days
- Total number of days when the automobile was made available to your employee
- divide by 30 days
- equals Result B - Number of days the automobile was available to the employee divided by 30 days (rounded to the nearest whole number if it is greater than one)
Step C - Value of the standby charge benefit
- Result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by Result A - Total monthly leasing cost of the automobile multiplied by the applicable fraction
- equals This is the value of the standby charge benefit before the reduced standby charge calculation
If your employee is not eligible for the reduced standby charge (step 6), continue to: Step G - Value of the standby charge which is a taxable benefit
If your employee is eligible for the reduced standby charge calculation (all conditions in step 6 have been met), continue to: Step D - Limit on the number of personal kilometres driven multiplied by Result B
Step D - Limit on the number of personal kilometres driven multiplied by Result B
- Result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by 1,667 km
- equals Result D - Limit on the number of personal kilometres driven multiplied by Result B
Step E - Application of the limit on the number of personal kilometres driven
- Total number of personal kilometres driven (step 6, condition 2)
- divide by Result D - Limit on the number of personal kilometres driven multiplied by Result B
- equals Result E - Application of the limit on the number of personal kilometres driven
Step F - Value of the reduced standby charge benefit
- Result C - Value of the standby charge benefit before the reduction
- multiply by Result E - Application of the limit on the number of personal kilometres driven
- equals This is the value of the reduced standby charge benefit
Step G - Value of the standby charge which is a taxable benefit
- Result F - Value of the reduced standby charge benefit
- minus Any amounts your employee reimbursed you for the standby charge
- equals This is the value of the reduced standby charge benefit which is a taxable benefit
Calculation example
In 2022, Judith was required to use an automobile leased by her employer in connection with her employment in Ontario. The initial costs (including down payment, trade-in amount, and taxes not included in monthly lease cost) was $500. The monthly leasing cost (including associated costs, GST/HST and PST) is $600 and the total lease period is 24 months. She is not selling or leasing automobiles. The automobile was made available to Judith for 150 days during the year. Judith was required to use the automobile in connection with her employment. She used the automobile for business (employment-related) driving 40% of the time. In reviewing her travel logbook, you found that she drove 12,000 km for personal driving out of a total of 20,000 km. Judith reimbursed you $500 for the standby charge.
Step A - Total monthly leasing cost of the automobile multiplied by the applicable fraction
- $500 is the one time charge for down payment
- divide by 24 months is the duration of lease
- equals $20.83 is the prorated amount of the one time charges
- plus $600 is the monthly payment to lessor, including associated costs, GST/HST and PST
- equals $620.83 is the total monthly leasing cost, including down payment, trade-in, and taxes
- multiply by 2/3
- equals $413.89 is the result A - Total monthly leasing cost of the automobile multiplied by the applicable fraction
Step B - Number of days the automobile was available to the employee divided by 30 days
- 150 is the total number of days when the automobile was made available to the employee
- divide by 30 days
- equals 5 is the result B - Number of days the automobile was available to Judith divided by 30 days (rounded to the nearest whole number if it is greater than one)
Step C - Value of the standby charge benefit
- 5 is the result B - Number of days the automobile was available to Judith divided by 30 days
- multiply by $413.89 is the result A - Total monthly leasing cost of the automobile multiplied by the applicable fraction
- equals $2,069.45 is the result
Step D, E and F do not apply - No calculation required
Judith is not eligible for the reduced standby charge calculation because 50% of the distance driven was not for business (employment-related) purposes.
Step G - Value of the standby charge which is a taxable benefit
- $2,069.45 is the result C - Value of the standby charge benefit
- minus $500 is the amount Judith reimbursed her employer for the standby charge
- equals $1,569.45 is the value of the standby charge benefit which is a taxable benefit
You own the automobile and your employee sells or leases automobiles - Calculate the standby charge using the detailed calculation
Use this calculation if all of the following apply:
- You own the automobile
- You make the automobile available to your employee or a person who does not deal at arm’s length with your employee
- Your employee mainly sells or leases automobiles
- You acquired at least one automobile during the year
If all the above conditions are met, you may choose to apply the rate of 1.5% instead of 2% to determine the automobile's cost, which is calculated as the greater of the following two amounts:
- The average cost of all new automobiles you acquired in the year to sell or lease
- The average cost of all automobiles you acquired in the year to sell or lease
If you do not choose this method, apply the rate of 2% to the cost of the automobile.
Step A - Cost of the automobile multiplied by applicable percentage
Use the following to calculate the standby charge using the detailed calculation:
- Average cost of all employer-owned automobile the employer acquired to sell or lease in the year (including GST/HST and PST)
- multiply by 1.5%
- equals Result A - Cost of the automobile multiplied by applicable percentage
Step B - Number of days the automobile was available to the employee divided by 30 days
- Total number of days when the automobile was made available to your employee
- divide by 30 days
- equals Result B - Number of days the automobile was available to the employee divided by 30 days (rounded to the nearest whole number if it is greater than one)
Step C - Value of the standby charge benefit before the reduction
- Result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by Result A - Cost of the automobile multiplied by applicable percentage
- equals This is the value of the standby charge benefit before the reduced standby charge calculation
If your employee is not eligible for the reduced standby charge (step 6), continue to: Step G - Value of the standby charge which is a taxable benefit
If your employee is eligible for the reduced standby charge calculation (all conditions in step 6 have been met), continue to: Step D - Limit on the number of personal kilometres driven multiplied by Result B
Step D - Limit on the number of personal kilometres driven multiplied by Result B
- Result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by 1,667 km
- equals Result D - Limit on the number of personal kilometres driven multiplied by Result B
Step E - Application of the limit on the number of personal kilometres driven
- Total number of personal kilometres driven (step 6, condition 2)
- divide by Result D - Limit on the number of personal kilometres driven multiplied by Result B
- equals Result E - Application of the limit on the number of personal kilometres driven
Step F - Value of the reduced standby charge benefit
- Result C - Value of the standby charge benefit before the reduction
- multiply by Result E - Application of the limit on the number of personal kilometres driven
- equals This is the value of the reduced standby charge benefit
Step G - Value of the standby charge which is a taxable benefit
- Result F - Value of the reduced standby charge benefit
- minus Any amounts your employee reimbursed you for the standby charge
- equals This is the value of the reduced standby charge benefit which is a taxable benefit
Calculation example
In 2022, Carole was required to use an automobile provided and owned by her employer in connection with her employment in Ontario. Carole’s primary source of employment is selling or leasing automobiles. You had chosen to use the rate of 1.5%. The average cost of all new and used automobiles you acquired to sell or lease in the year was greater than the average cost of all new automobiles you acquired in the year to sell or lease. The average cost of all new and used automobiles you acquired to sell or lease in the year (including GST/HST and PST) was $50,000. The automobile was made available to Carole for 150 days during the year. She used the automobile for business (employment-related) driving 80% of the time. In reviewing her travel logbook, you found that she drove 5,500 km for personal driving (1,100 km per 30-day period) out of a total of 27,525 km. Carole reimbursed you $500 for the standby charge.
Step A - Cost of the automobile multiplied by applicable percentage
- $50,000 for the cost of employer-owned automobile (including trade-in amount, additions, GST/HST and PST)
- multiply by 1.5%
- equals $750 is the result A - Cost of the automobile multiplied by applicable percentage
Step B - Number of days the automobile was available to the employee divided by 30 days
- 150 is the total number of days when the automobile was made available to the employee
- divide by 30 days
- equals 5 is the result B - Number of days the automobile was available to the employee divided by 30 days (rounded to the nearest whole number if it is greater than one)
Step C - Value of the standby charge benefit before the reduced standby charge
- 5 is the result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by $750 is the result A - Cost of the automobile multiplied by applicable percentage
- equals $3,750 is the value of the standby charge benefit before the reduced standby charge calculation
Step D - Limit on the number of personal kilometres driven multiplied by Result B
- 5 is the result B - Number of days the automobile was available to the employee divided by 30 days
- multiply by 1,667 km
- equals 8,335 is the result D - Limit on the number of personal kilometres driven multiplied by Result B
Step E - Application of the limit on the number of personal kilometres driven
- 5,500 is the total number of personal kilometres driven (step 6, condition 2)
- divide by 8,335 is the result D - Limit on the number of personal kilometres driven multiplied by Result B
- equals 0.66 is the result E - Application of the limit on the number of personal kilometres driven
Step F - Value of the reduced standby charge benefit
- $3,750 is the result C - Value of the standby charge benefit before the reduction
- multiply by 0.66 is the result E - Application of the limit on the number of personal kilometres driven
- equals $2,475 is the value of the reduced standby charge benefit
Step G - Value of the standby charge which is a taxable benefit
- $2,475 is the result F - Value of the reduced standby charge benefit
- minus $500 is the amount Carole reimbursed her employee for the standby charge
- equals $1,975 is the value of the reduced standby charge benefit which is a taxable benefit
Determine if you need to calculate the operating expense benefit
You need to determine if you have to calculate the operating expense benefit depending on your employee's situation.
Situation: Calculation
You have to calculate the operating expense benefit if one of the following apply:
- You provide an automobile to your employee and pay for the operating expenses related to personal driving of the automobile (including the GST/HST and PST)
- Your employee does not reimburse you
- Your employee reimburses you for part of the automobile’s operating expenses in the year or no later than 45 after the end of the year
Continue to: Step 11 - Determine if your employee is eligible for the optional operating expenses calculation.
Situation: No calculation
You do not have to calculate the operating expenss benefit if your employee reimburses you for all operating expenses related to personal driving no later than 45 days after the end of the year.
Continue to: Step 13 - Calculate the total taxable automobile benefit to be included on the T4 slip.
Determine if your employee is eligible for the optional operating expense benefit calculation
You can use the optional calculation for the operating expense benefit if all of the following apply:
- You include a standby charge in your employee’s income
- Your employee uses the automobile primarily (more than 50%) in the course of their office or employment
- Your employee informed you in writing, before the end of the year, of their intention to use the optional method
If your employee does not meet all conditions, your employee is not eligible for the optional operating expense benefit calculation.
You must use the fixed rate operating expense benefit calculation.
If your employee meets all conditions, your employee is eligible for the optional operating expense benefit calculation.
Calculate the operating expense benefit
If you make an automobile available to your employee, you must also calculate the value of the operating expense benefit related to the personal driving of the automobile.
Your employee must keep the records of this benefit even if you are using the fixed rate calculation.
Operating expenses paid by employee to third party
Under the CRA administrative policy, if you made an automobile available to your employee and you require your employee to pay a third party for part or all of the operating expense in the year, you can deduct the portion of the expenses paid by your employee that are attributable to personal use from the operating expense benefit that you calculated. Your records have to show that your employee paid the expenses directly to the third party.
The portion of the operating expenses that relates to personal use is the percentage obtained by dividing the number of personal kilometres by the total number of kilometres driven by the employee during the year while the automobile was available to the employee.
Excess amounts cannot be deducted from the employee’s standby charge that you calculated.
Depending on your situation, the optional calculation may result in a higher benefit amount than the fixed rate calculation.
Optional or fixed rate calculations
Calculate the operating expense benefit using the optional calculation
Use the following to calculate the operating expense benefit using the optional calculation if all conditions in step 11 are met:
- Value of the standby charge before reimbursements from Step 9 - Calculate the standby charge benefit
- multiply by 50%
- equals This is the amount for the operating expense benefit
- minus Any amounts your employee reimbursed you for the operating expense benefit no later than 45 days after the end of the year
- equals This is the total value of the operating expense benefit
Calculation example
In 2022, Matthew was required to use an automobile provided and owned by his employer in connection with his employment in Ontario. The cost of the automobile when it was bought, including options and accessories, and the HST was $50,000. His employment does not involve selling or leasing automobiles. The automobile was made available to Matthew throughout the year (365 days) and the operating expenses were paid by his employer. In reviewing his travel logbook, you found that he drove 10,000 km for personal driving out of a total of 12,000 km. Matthew reimbursed you $500 for the standby charge, $300 for operating expenses 45 days before the end of the year and $200 directly to third party in the year. Matthew provided a written notice to use the optional calculation method to calculate the operating expense benefit.
- $12,000 is the value of the standby charge before reimbursements from Step 9 - Calculate the standby charge benefit
- multiply by 50%
- equals $6,000 is the amount for the operating expense benefit
- minus $300 is the amounts Matthew reimbursed you for the operating expense benefit
- equals $5,700 is the total value of the operating expense benefit
Calculate the operating expense benefit using the fixed rate calculation
Use the prescribed rate per kilometre of personal driving to calculate the operating expense benefit using the fixed rate calculation:
- Total number of kilometres travelled for personal driving
- multiply by Fixed rate
- equals This is the amount for the operating expense benefit
- minus Any amounts your employee reimbursed you for the operating costs benefit no later than 45 days after the end of the year
- equals This is the total value of the operating expense benefit
Prescribed rates (section 7305.1 of the ITR) per kilometre
Prescribed rates (section 7305.1 of the Income Tax Regulations) per kilometre Year Employee does not sell or leases automobiles Employee’s source of employment is selling or leasing automobiles 2024 $0.33 $0.30 2023 $0.33 $0.30 2022 $0.29 $0.29 2021 $0.27 $0.24 2020 $0.28 $0.25 2019 $0.28 $0.25 2018 $0.26 $0.23 2017 $0.25 $0.22 2016 $0.26 $0.23 2015 $0.27 $0.24 Calculation example
In 2022, Matthew was required to use an automobile provided and owned by his employer in connection with his employment in Ontario. The cost of the automobile when it was bought, including options and accessories, and the HST was $50,000. His employment does not involve selling or leasing automobiles. The automobile was made available to Matthew throughout the year (365 days). In reviewing his travel logbook, you found that he drove 10,000 km for personal driving out of a total of 12,000 km. Matthew reimbursed you $500 for the standby charge and $300 for operating expenses 45 days before the end of the year. Matthew did not notify you in writing before the end of the taxation year to use the optional calculation method. Therefore, the fixed rate calculation is used to determine the operating expense benefit.
Use the following for the fixed rate operating expense calculation:
- 10,000 km is the total number of kilometres Matthew travelled for personal driving
- multiply by $0.29 is the fixed rate for 2022
- equals $2,900 is the amount for the operating expense benefit
- minus $300 is the amount Matthew reimbursed for the operating expense benefit
- equals $2,600 is the total value of the operating expense benefit
Calculate the total taxable automobile benefit to be included on the T4 slip
Use the following calculation to determine the total value of your employee’s benefit:
- Standby charge benefit (step 9)
- plus Operating expense benefit (step 12)
- equals Result
- minus Any amounts your employee paid to a third party for personal driving
- equals Value of the automobile benefit to be included on the T4 slip in code 34
Calculation example
In 2022, Matthew was required to use an automobile provided and owned by his employer in connection with his employment in Ontario. The cost of the automobile when it was bought, including options and accessories, and the HST was $50,000. He is not selling or leasing automobiles. The automobile was made available to Matthew throughout the year (365 days). In reviewing his travel logbook, you found that he drove 10,000 km for personal driving out of a total of 12,000 km. Matthew reimbursed you $500 for the standby charge. Matthew reimbursed $166.67 directly to a third party in the year for operating expenses. Matthew did not provide a written notice to use the optional calculation method to calculate the operating expense benefit.
- $11,500 is Matthew’s standby charge (step 9)
- plus $2,600 is Matthew’s operating expenses (step 12)
- equals $14,100 is the result
- minus $166.67 is the amount Matthew paid to a third party for personal driving
- equals $13,933.33 is the total value of the automobile benefit to be included on the T4 slip in code 34
The employer needs to report on Matthew’s T4 slip the amount of $13,933.33 for the total automobile benefits.
Withhold payroll deductions and calculate the GST/HST to remit
The benefit for personal driving of an automobile is a non-cash benefit.
If the benefit is taxable, you must withhold the following deductions:
Withhold: Option 1
- Income tax
- CPP
- EI (do not withhold)
Remit: Option 2
- GST/HST in certain situations
The amounts must be included in the pay period they were received or enjoyed.
Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate - Calculate payroll deductions and contributions
Report the benefit on a slip
If the benefit is taxable, you must report the following on a T4 or T4A slip.
T4 - Employee: Option 1
Report on:
- Box 14 - Employment Income
- Box 24 - EI insurable earnings (for cash benefit only)
- Box 26 - CPP/QPP pensionable earnings
- Code 34 - Personal use of employer’s automobile or motor vehicle
T4A - Person or partnership that was a shareholder: Option 2
Report on:
- Code 028 - Other income
Learn how to report the benefit on a slip: Fill out the slips and summaries - File information returns (slips and summaries)
References
Related
- Government Announces the 2024 Automobile Deduction Limits and Expense Benefit Rates for Businesses
- Form RC18, Calculating Automobile Benefits
Legislation
- ITA: 6(1)(a)
- Value of benefits
- ITA: 6(1)(a)(iii)
- Use of an automobile
- ITA: 6(1)(b)
- Personal or living expenses (allowances)
- ITA: 6(1)(b)(i)
- Travel, personal or living expense allowances. (fixed by an Act of Parliament / Under the authority of the Treasury Board)
- ITA: 6(1)(b)(ii)
- Travel and separation allowances (Canadian Forces)
- ITA: 6(1)(b)(iii)
- Representation or other special allowances (person described in paragraph 250(1)(b) ITA)
- ITA: 6(1)(b)(iv)
- Representation or other special allowances (agent-general of a province – Period in Ottawa)
- ITA: 6(1)(b)(v)
- Reasonable allowances for travel expenses (in connection with the selling of property or negotiating of contracts for the employee’s employer)
- ITA: 6(1)(b)(v.1)
- Allowances for board and lodging to a monthly maximum of $300 (members of a sports team or recreation program)
- ITA: 6(1)(b)(vi)
- Reasonable allowances received by a minister or clergyman
- ITA: 6(1)(b)(vii)
- Reasonable allowances for travel expenses (Restriction at the municipal or regional level)
- ITA: 6(1)(b)(vii.1)
- Reasonable allowances for the use of a motor vehicle (received from the employee’s employer for travelling in the performance of employment duties)
- ITA: 6(1)(b)(x)
- Allowance for the use of the vehicle for the purpose of the allowance is not based solely on the number of kilometers
- ITA: 6(1)(b)(ix)
- Allowance not in excess of reasonable amounts for tuition fees (Child living away from the employee’s domestic establishment – official language)
- ITA: 6(1)(b)(xi)
- Reimbursement for supplementary business insurance, toll or ferry charges if the allowance was determined without reference to those reimbursed expenses
- ITA: 6(1)(e) and 6(2)
- Standby charge and calculation – Employer’s automobile available for personal driving
- ITA: 6(1)(e)(i)
- description
- ITA: 6(1)(e)(ii)
- Amounts repaid by the employee for standby charge
- ITA: 6(1)(e)(ii)
- Amounts repaid or reimbursed by the employee for standby charge
- ITA: 6(1)(k)
- Automobile operating expense benefit
- ITA: 6(1)(k)(v)
- Prescribed per-kilometre rate - general calculation rule
- ITA: 6(1)(k)(iv)
- Half of the standby charge - optional calculation
- ITA: 6(1)(l)
- Automobile operating benefit – Where amounts are not calculated under 6(1)(k) and an employee receives payment (not an allowance) for the cost of operating the employee’s automobile
- ITA: 6(1.1)
- Parking not included in the automobile benefit. Parking is a separate benefit.
- ITA: 6(2)
- Standby charge + calculation – employer’s automobile available for personal driving
- ITA: 6(2.1)
- Automobile salesperson
- ITA: 6(6)
- Employment at special work site or remote location
- ITA: 6(7)
- GST or HST payable by the employer in purchasing or leasing an employer-provided automobile is included in the benefit calculation
- ITA: 15
- Transactions between corporation and shareholders
- ITA: 15(1)
- Benefit conferred to shareholder
- ITA: 15(5)
- Automobile benefit
- ITA: 123(1)
- Definition of employer and employee
- ITA: 126(2)
- Related persons
- ITA: 248(1)
- Definitions of automobile
- ITA: 251(2)(a)
- Relationship between two individuals
- ITA: 251(2)(b)
- Relationship between a corporation and a person (individual, corporation, partnership, or trust)
- ITA: 251(2)(c)
- Relationship between two corporations
- ITR: 7305.1
- Prescribed operating expense amounts
- CPP: 12(1)
- Amount of contributory salary and wages
- ETA: 173
- Taxable benefit is considered a supply for GST/HST purposes
- ETA: 173(1)(b)
- ITC restrictions – property or services exclusively for the personal use, consumption or enjoyment of an individual
- ETA: 173(1)(c)
- Supply of property otherwise than by way of sale
- ETA: 173(1)(d)
- Exclusions
- ETA: 173(1)(d)(i)
- ITC restrictions under section 170
- ETA: 173(1)(d)(vi)(A)
- Calculating the tax for automobile operating cost benefit
- ETA: 173(1)(d)(vi)(B)
- Calculating the tax for standby charge benefit
- ETA: 173(2)
- Election in effect to forego ITCs
- ETA: 173(3)
- Effect of the election
- IECPR: 2(1)
- Amount of insurable earnings
- IECPR: 2(3)
- Earnings from insurable employment
- IECPR: 2(3)(a.1)
- Earnings from insurable employment - amount excluded as income under 6(1)(a) or (b), 6(6) or (16) of the ITA
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