Herbert & Company - Certified General Accountant


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Automobile Benefits - Standby Charges

A standby charge is applicable when employees gain a benefit from using the employer's automobile for their personal use. Personal driving includes vacation trips; driving for personal use; and travel between home and work. If an employee does not use the automobile for personal driving, there will be no taxable benefit.

Owned Vehicles

The standby charge is based on:

  • 2% of the vehicles cost (including tax)
  • number of 30 day periods in the year the automobile was available to the employee
  • personal driving by the employee
  • any reimbursements received by the employer from the employee for the benefit

Leased Vehicles

The standby charge is based on:

  • 2/3 of the cost (including tax) of the lease less insurance costs payable to the lessor
  • number of 30 day periods in the year the automobile was available to the employee
  • personal driving by the employee
  • any reimbursements received by the employer for the benefit

When a standby charge is applicable, the amount of the benefit must be reported on the employee's T4 slip (or T4A for shareholders). There are obvious tax consequences resulting from the benefit. It is very important for the employer and employee to keep detailed records on personal use and a mileage log for business use. There are other issues regarding the calculation of this taxable benefit. If you require further information you can visit CRA's web site (www.canada.ca) or obtain the guide "Employers' Guide - Taxable Benefits and Allowances" (T4130).

Canada Revenue Agency provides a program for calculating auto benefits called "Automobile Benefits Online Calculator" on their website (www.canada.ca).

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