This issue will serve as a reminder of certain details, often forgotten, regarding the preparation of T4 and Relevé 1 forms.
AUTOMOBILE BENEFITS FOR 2021
Automobile benefits are the total of the stand-by charge and the operating expense benefit.
1. Stand-by Charge
A/B = usually equals 1 unless automobile used 50% or more for business by employee
C = cost of automobile including GST and QST
D = number of 30-day periods automobile available to employee (usually D = 12)(b) Stand-by charge on automobile leased by Company = A/B x [2/3 x (E – F) x D]
D = number of 30-day periods automobile available to employee (usually D = 12)
E = monthly lease cost including GST and QST
F = insurance amount included in monthly lease cost for damage to, or liability from, use of automobile
(c) Reducing the stand-by charge
A reduction to the stand-by charge can be applied if: i) more than 50% of the kilometres driven in the year are used for business purposes, ii) the personal kilometres are less than 1,667 per 30-day period for a total of 20,004 kilometres per year, and iii) employee is required to use the automobile to perform their duties.
If these three conditions are met, the stand-by charge is calculated in proportion to the number of personal kilometres over 1,667 kilometres per 30-day period times the number of 30-day periods the automobile was available in the taxation year.
2. Operating Expense Benefit
- $0.27 per personal kilometre
- Option available to calculate as 1/2 of stand-by charge if:
(a) automobile used primarily (50% or more) to perform duties of office or employment (more information on this. See below); and
(b) employee informed employer in writing before December 31st as to desire to use this option.
The stand-by charge and operating expense benefit can be reduced if an employee makes any reimbursement no later than 45 days after the end of the year.
Note: For an employer, stand-by charges and operating expense benefits are not subject to employment insurance or QPIP contributions but are subject to QPP (where maximum contributions have not been exceeded), HSF and CNT contributions.
3. COVID-19 Relief Measures for 2021
Many employees will not qualify for the reduced standby charge calculated under the usual rules since they worked from home for most of the year. The government has relaxed its requirements for 2020 and 2021 and will allow employees who qualified for the reduction in 2019 to benefit from the reduced standby charge and operating expense benefit if the following conditions are met:
(a) The employee used an automobile primarily for business (50% or more) in 2019; and
(b) The employee is using an automobile provided by the same employer as in 2019.
- If stand-by charge and operating expense benefit calculated as above, GST and QST are already included in benefit for a Quebec employee.
- GST to be remitted to government with the return that includes
February 28, 2022 is calculated as follows:
- Stand-by charge = 4/104 x stand-by charge
- Operating expense benefit = 3% of operating expense benefit
- QST to be remitted to government with the return that includes
February 28, 2022 is calculated as follows:
- Stand-by charge = 9.975/109.975 x stand-by charge
- Operating expense benefit = 6% of operating expense benefit
LOGBOOK FOR EMPLOYEES WHO USE AN AUTOMOBILE MADE AVAILABLE BY THE EMPLOYER
For Quebec, an employee who uses an automobile made available by his employer must remit to him, before January 10 of the following year (or ten days after the end of the period the automobile was made available to the employee), a copy of the logbook for the year.
This logbook must indicate, on a daily basis, the number of kilometres travelled in the course of the individual’s office or employment. Therefore, the employee must specify the point of departure and the destination where he is travelling for business purposes and the number of kilometres.
At the end of each week or month, the logbook must indicate the number of kilometres driven for personal use, which is determined by the difference between the total distance driven and the distance travelled for business purposes.
Note that the distance travelled between home and the employer’s office is considered to be personal use.
The EMPLOYEE is subject to a penalty of $200 if the logbook is not given to the employer.
The employer will use this logbook to calculate the employee automobile benefits.
For Non-Quebec Residents
For Federal purposes, the government has established the guidelines to document the use of a vehicle in 2010 and beyond. However, because the Quebec Government has not adopted the Federal guidelines, they are irrelevant for a Quebec resident. For taxpayers residing outside of Quebec, we refer you to the document Documenting the use of a vehicle available on the Canada Revenue Agency’s website at https://www.canada.ca/en/revenue-agency/services/what-s-new/documenting-use-a-vehicle.html.
2021 PRESCRIBED RATES FOR LOW-INTEREST OR NO-INTEREST LOANS
|January 1 - March 31||1%|
|April 1 - June 30||1%|
|July 1 - September 30||1%|
|October 1 - December 31||1%|
- The above rates are applicable for both Federal and Quebec reporting.
- No GST and QST is added to taxable benefits on low-interest or no-interest loans.
- The prescribed rate used to calculate taxable benefits on home purchase loans does not exceed the prescribed rate in effect when the loan was granted. This interest rate is a maximum rate (ceiling) for a five-year period.
- Reported on T4 not T4A (and Relevé 1)
- Subject to QPP, QPIP and HSF
- Not subject to EI or CNT
The matters highlighted in this tax memo are presented in broad general terms and, of course, cannot be applied without consideration of all circumstances. The firm will be pleased to discuss with recipients the possible effects of these matters in specific situations.