Housing and Travel Benefits

Housing & Travel Benefits
 May 25, 2022
Speaking notes

1. Housing & Travel Benefits

Hello and welcome to the Housing & Travel Benefits Webinar.

I’m Jackie, your host for today.

2. Introduction

We ask you to use the question box to post your questions related to today’s webinar.

We’ll answer as many as we can during and 20 minutes after the webinar.

For any other tax related questions, we invite you to call the business enquiries line at 1-800-959-5525.

Let’s get started.

3. Outline

Today, we’ll talk about:

• Definition of benefits
• Payroll implications
• Distinction between allowance, advance or reimbursement
• What is considered a travel benefit?
• What is considered a housing benefit?
• Special work sites and remote work locations
• Special circumstances to reduce the value of the benefit
• Home purchase loans

4. Housing & Travel Benefits

Before we talk about housing or travel, let’s clarify what a benefit is. A benefit is a material or economic gain received from a payment, good or service paid by the employer to an employee or a relative of the employee. These benefits are subject to tax.

These payments or services must be taxed. Therefore, it is important for an employer to know what they are, so that they can be properly reported. Usually, benefits are reported as income in box 14 of the T4, but not always. Now let’s talk about different benefits and how they should be reported. 

5. What is a benefit? Example

Let’s start with a simple parking benefit.

If an employer provides free parking to their employees, this is generally considered to be a taxable benefit. For information on whether or not your situation is an exception, please visit Canada.ca/cra-parking.

If an employer provides parking as a benefit to their employees, and it is taxable, then it must be reported on their T4.

For example, Ivan makes $50,000 a year as his salary. His employer provides him with free parking in the core of the city which costs $250 a month. This is a $3000 year annual taxable benefit. Ivan’s employer will include $53,000 on his T4 in box 14, and will deduct income tax and Canada Pension Plan or CPP contributions from this amount. Ivan’s employer will also include $3,000 in box 40, as other taxable allowances and benefits. Theoretically, there could also be additional taxable benefits. These would also be included in box 40, but for now, let’s assume that $3,000 was the only amount.

Because Ivan’s employer pays for his parking directly and no cash is involved, Ivan’s employer does not deduct Employment Insurance from the $3000 benefit.

6. What is a benefit? Payroll implications (continued)

Depending on the situation, the benefit may be taxable, pensionable and/or insurable, which means that you have to deduct Canada Pension Plan (CPP) and/or Employment Insurance (EI). In some scenarios, the benefit will be taxable and pensionable but not insurable, as in the parking example we have just discussed.

To learn more on mandatory deductions on benefits, see guide T4001 – Employers guide, Payroll Deductions and Remittances.

7. Differences between an allowance, advance and reimbursements

Now that we know what a benefit is, let’s talk about specific benefits involving allowances or advances and reimbursements. They may sound similar, but there are different tax implications depending on how an employer operates.

First an allowance, also known as an advance, is any periodic or lump-sum amount that an employer pays to their employee on top of salary or wages, to help the employee pay for certain anticipated expenses.

An allowance or advance is:

• usually an estimated amount that is predetermined without using the actual cost
• usually for a specific purpose
• used as the employee chooses, since the employee need not provide receipts 

8. Differences between an allowance, advance and reimbursements (continued)

An allowance or advance can also be calculated based on distance, time or something else, such as a motor vehicle allowance determined by the distance driven, or a meal allowance determined by the type and number of meals per day. 

9. Differences between an allowance, advance and reimbursements (continued)

A reimbursement is an amount an employer pays to their employee to repay expenses they incurred while carrying out the duties of employment. The employee has to keep proper records with detailed receipts to support the expenses, and give them to the employer.

Examples of products that can be reimbursed include an employee’s gas and meals while they are conducting their business. For instance, an employee pays for meals, accommodation, flights and travel for an out-of-town business conference, that they provide receipts for and are reimbursed for these costs by the employer.

Another way to think of reimbursements is who benefits. Where there is a reimbursement, a determination must be made as to whether the employee has received an economic benefit. Normally, there is no benefit if the employee is in the same economic position as he or she was in prior to the transaction that gave rise to the reimbursement. 

10. Differences between an allowance, advance and reimbursements (continued)

Usually, a reimbursement, or an accountable advance for travel expenses is not income to the employee receiving it, unless it represents payment of the employee's personal expenses.

Do not include reasonable reimbursements, which are part of your business expenses in the employee's income. The term “reasonable” usually means at fair market value or at CRA’s prescribed rates.

This section allows employers to use a rule of thumb rather than calculate a reasonable rate for each employee. These rates account for the type of vehicle and driving conditions. 

11. Differences between an allowance, advance and reimbursements (continued)

Anastasia is an employee with DEF Inc, and occasionally has to travel within the municipality to pick up supplies for her company using her own vehicle. This normally takes her most of the day. DEF gives Jenny an allowance of $50 to cover vehicle expenses and any food and beverage expense she may incur while performing her duties while away from her regular place of work.

Since this policy has a flat rate allowance for gas and meals not based on CRA’s prescribed rates, we would consider the flat rate allowance of $50, covering both meals and motor vehicle expenses to be unreasonable. The entire allowance would be a taxable benefit to Jenny, unless DEF Company can show that the portion related to the meals is reasonable in the circumstances.

12. Differences between an allowance, advance and reimbursements (continued)

An example of a reimbursement would be if Anastasia instead had to provide receipts for her expenses incurred during her regular job duties.

• Every week, she provides her employer with a gas receipt. This receipts generally average at around $150.
• She provides her employer with receipts from her meals for the week totaling $75 a week.

Her employer confirms the expenses and reimburses her $225.

In this case there is no taxable benefit as this is a reimbursement and Anastasia’s employer does not declare the $225 as income on her T4.  

13. What is reasonable?

How do we decide what is reasonable?

Well, whether an allowance for travel expenses is reasonable is a question of fact. You are encouraged to compare the reasonable costs for travel expenses that you would expect your employee to incur against the allowance you pay to the employee for the trip. If the travel allowance is reasonable, you do not have to include it in your employee’s income. If it is not reasonable, the allowance has to be included in your employee’s income.

For more information, see paragraph 48 in interpretation bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees. Your employee may be able to claim certain employment expenses on their income tax and benefit return. 

14. What is a travel benefit?

Let’s discuss benefits. First up is the travel benefit.

An employer must include a reasonable travel allowance in the income of employees, other than a salesperson or member of the clergy, who travel to perform the duties of their employment.

In other words, if your employee is travelling for work and you provide funds for said travel, then this may be considered a taxable benefit. However, this is not always the case.

15. What is a travel allowance? (continued)

It is not a taxable benefit and can be excluded from the employee's income if all of the following conditions are met:

• The employee travels away from the office
• The allowance is reasonable. We generally consider a value of up to $23 for the meal portion of the travel allowance to be reasonable*
• The employer is the primary beneficiary of the allowance
• The allowance is not an additional form of remuneration

This means that you do not have to include this type of travel allowance if its main reason is to increase productivity  during a work shift.

It is important to note that there are circumstances where due to the location, cost and remoteness, $23 would be insufficient for meals. Your situation may vary. 

16. What is considered a Housing Benefit?

An employer may provide their employee with board and lodging, which means accommodations and meals or food on a longer-term basis.

If an employer provides an employee such as the superintendent of an apartment block, with a house apartment or similar accommodation rent free or for less than the fair market value (FMV) of such accommodation there is a taxable benefit for the employee.

The employer must estimate a reasonable amount for the housing benefit. It is usually the FMV for the same type of accommodation, minus any rent the employee paid.

An employer would include the value of the board and lodging, or the benefit, in the employee’s income as discussed before. Board and Lodging is not only noted on an employee’s T4 in box 14, but also  in box 30 “Board and Lodging”.

In addition, the amount an employer pays on behalf of, or reimburse to your employee for utilities is also a taxable benefit. This is the amount you include in the employee’s income as a utilities benefit under box 40 under other information.

17. What is considered a Housing Benefit? (Continued)

Now, it is possible that Anastasia’s employer provides her with a partial reimbursement on her lodging or subsidized lodging. In this case, Anastasia pays a portion of cost of the accommodations, and receives a taxable benefit for the fair market value of the lodging. However, the employer must ensure that he subtracts Anastasia's payments.

For example, if a hotel room costs $150, and Anastasia pays $50 and her employer pays $100, then Anastasia’s employer only adds $100 to Anastasia’s T4 in box 14 and box 30. 

18. What is considered a Housing Benefit? (Continued)

There are exceptions to this rule that apply to two different groups:

• Board and lodging allowances to players on sports teams or members of recreation programs
• Board, lodging or transportation to an employee who works at a special work site or a remote work location

Let’s examine both of these exceptions. 

19. What is considered a Housing Benefit? (Continued)

An employer can exclude a board and lodging allowance up to $377 (for 2021) per month from income for  a participant or member of a sports team or recreational program, if all of the following conditions are met:

• They are a registered charity or a non-profit organization
• participation with, or membership on the team or in the program is restricted to persons under 21 years of age
• the allowance is for board and lodging for participants or members that have to live away from their ordinary place of residence
• the allowance is not attributable to any services, such as coaching, refereeing, or other services to the team or program

If all of those  conditions are met then the employer does not report the excluded amount on a T4 slip. 

20. Special work sites and remote work locations

The second exception is board and lodging and/or transportation when an employee works at a special work site or a remote location. We'll deal with special work site first.

A Special work site is an area where temporary duties are performed by an employee, who keeps a self-contained domestic establishment at another location as their principal place of residence. The distance between their principal residence and the special work site must be large enough that the employee is not expected to return daily to their principal residence. 

21. Special work sites and remote work locations - Self-Contained domestic establishment

Note that a self-contained domestic establishment or an SCDE, is a house, apartment, or other place of residence where a person usually sleeps and eats.

It is generally a living unit with restricted access that contains a kitchen, bathroom, and sleeping facilities. The SCDE must be separate from any other living unit in the same building. A room in a hotel, dormitory, boarding house, or bunkhouse is not ordinarily considered to be a SCDE.

22. Special work sites and remote work locations – GST/HST and PST

Usually, GST/HST and PST applies on meals and accommodations the employer provides to their employee. In certain cases, such as long-term residential accommodation of one month or more, no GST/HST and PST applies. Where the GST/HST and PST does apply, include it in the value of the benefit.

This is particularly relevant for special work sites and remote work locations.

23. Special work sites and remote work locations – Special work sites

Now that we know what a special work site is, let’s take a look at some of the benefits associated with it.

An employer can exclude from income the value of a reasonable allowance for board and lodging provided to their employee who works at a special work site, if all of the following conditions are met:

• The employee's duties required them to be away from their principal place of residence or to be at the special work site,
• The employee had to work at a special work site where the duties performed were of a temporary nature,

24. Special work sites and remote work locations – Special work sites (Continued)

• The employee kept, at another location, a self-contained domestic establishment as their principal place of residence that was available to them and not rented, but that, because of the distance, was not reasonably expected to return daily from the special work site; and
• The board and lodging, or the reasonable allowance for board and lodging, the employer provided to their employee had to have been for a period of at least 36 hours. This period can include time spent travelling between the employee's principal place of residence and a special work site

25. Special work sites and remote work locations – Special work sites transportation

An employer can exclude from their employee’s income the value of free or subsidized transportation, or reasonable allowance for transportation expenses, that the employer provides to their employee, who works at a special work site, if all of the following conditions are met:

1. the free or subsidized transportation, or the allowance, was for transportation between the special work site and your employee’s principal place of residence,
2. the employee’s duties required them to be away from their principal place of residence or be at the special work site for a period of at least 36 hours; and
3. The employer (or a third party) provided board and lodging, or a reasonable allowance for board and lodging, to your employee for that period

26.  Special work sites and remote work locations – Special work sites TD4

If all of the conditions listed under Board and lodging noted above are met, the employer and the employee should fill out Form TD4, Declaration of Exemption – Employment at a Special Work Site.

This form allows the employer to exclude the benefit or allowance from their employee's income. If an employer fills out Form TD4, do not include the amounts in box 14, "Employment income," or in the "Other information" area under code 30 at the bottom of the employee's T4 slip. After you fill out Form TD4, with the employee, keep it with your payroll records.

If all of the above-noted conditions are not met, do not fill out Form TD4. Treat the total amounts as part of the employee's income. Make the necessary deductions and report the amounts on the employee's T4 slip. This also applies to any part of an allowance for board, lodging, and transportation that is more than a reasonable amount.

27. Special work sites and remote work locations – Remote work locations

Now let’s take a look at what remote work locations are.

The CRA usually considers a work location to be remote when it is 80 kilometres or more from the nearest established community with a population of at least 1,000 people.

28. Special work sites and remote work locations – Remote work locations (Continued)

A location is considered an established community if it has essential services, or if those services are available within a reasonable commuting distance. Essential services may include:

• basic food store
• basic clothing store, with merchandise in stock (not a mail-order outlet)
• accommodation
• certain medical services
• certain educational facilities

29. Special work sites and remote work locations – Board and lodging at a remote work location

Now that we know what a remote work location is, let’s look at some of the board and lodging benefits.

An employer can exclude from income the value of board and lodging, or a reasonable allowance  for board and lodging that was provided to an employee at a remote work location, if all of the following conditions are met:

• the employee could not reasonably be expected to set up and maintain a self-contained domestic establishment because of the remoteness of the location and the distance from any established community
• The employer did not provide a self-contained domestic establishment for the employee; and

30. Special work sites and remote work locations – Board and lodging at a remote work location (continued)

• the board and lodging, or reasonable allowances  for board and lodging, were for a period of at least 36 hours when one of the following situations applied:
  • the employee had to be away from their principal place of residence because of their duties
  • the employee had to be at the remote work location

31. Special work sites and remote work locations – Remote work locations/Transportation

Now let’s take a look at transportation benefits around remote work locations.

The employer can exclude from their employee’s income the value of free or subsidized transportation, or a reasonable allowance for transportation expenses provided to their employee at a remote work location, if all of the following conditions are met:

• The employee’s duties required them to be away from their principal place of residence or to be at the remote work location for a period of at least 36 hours

32. Special work sites and remote work locations – Remote work locations/Transportation (Continued)

• The free or subsidized transportation, or the allowance, was for transportation between the remote work location and any location in Canada. If the remote work location is outside Canada, the employer can exclude the allowance for transportation between that location and any location in Canada or outside Canada, and
• The employer (or a third party) provided board and lodging, or a reasonable allowance for board and lodging, to their employee for that period

33. Special work sites and remote work locations – Payroll deductions

It is important to note, that if a benefit is excluded, it is not a taxable benefit.

Do not deduct CPP contributions, EI premiums, or income tax.

34. Special circumstances to reduce the value of the benefit

Now that we have taken a look at the different types of lodging and boarding benefits and some of situations where these benefits are excluded, let’s look at situations where the benefits may be reduced.

There are two different factors may reduce the value of a housing benefit an employer provides to their employee.

These two factors are:

• Suitability of size
• Loss of privacy and quiet enjoyment

35. Special circumstances to reduce the value of the benefit – Suitability of Size

The suitability of size requirement basically means that a person is living in an accommodation that is larger than they need.

As an example, suppose Artem is given an assignment in a city far away from his principal residence. His employer provides him with a house to live in for the duration of this temporary assignment. The house is a 4 bedroom house. It was the only accommodation Artem’s employer could find in a short time frame.

Nevertheless, Artem’s employer does not have to include the entire cost of the house rental as part of Artem’s income. Instead, he can insert the fair market value of a 1 bedroom apartment in the same city, since this is the only space he needs.

36. Special circumstances to reduce the value of the benefit – Suitability of Size (example)

As an example, suppose Artem moves to a 4 bedroom house in January, 500 kilometres away from his principal residence where the rent is paid for by his employer. He will be at this house for one year.

The house rents for $2500. Artem only uses one room as the 4 bedroom house was the only available place to rent in the small town he currently lives in.

The employer then adjusts the benefit included on the T4 to reflect the FMV of a one-bedroom apartment for the small town he is in which is $1000 a month or $12,000 for the year.

37. Special circumstances to reduce the value of the benefit – Loss of privacy and quiet enjoyment

The loss of privacy and quiet enjoyment factor is also self-explanatory. If the accommodation the employer provides to their employee contains things like equipment, public access, or storage facilities that infringe on the employee's privacy or quiet enjoyment of the accommodation, the employer can reduce the value of the housing benefit.

The reduction has to reasonably relate to the degree of disturbance that affects your employee.

38. Special circumstances to reduce the value of the benefit

 If both circumstances apply to an accommodation, an employer should first reduce the amount to equal the value of an accommodation that suits the employee's needs.

Then the employer should apply any reduction for loss of privacy and quiet enjoyment to that reduced value.

39. Home Purchase Loan

Let’s now take a look at a home purchase loan.

A home-purchase loan is any part of a loan from the employer to an employee that the employee used to obtain or repay another loan to buy a residence. The residence has to be for that employee or a person related to that employee. This also applies to a shareholder or a person related to a shareholder.

In other words, a home purchase loan is a taxable benefit since the employee received that loan, only because he is employed with a specific employer.

It is also important to note that there are prescribed rates for a home purchase loan. If the interest rate paid by an employee is higher than the prescribed rate for taxable benefits on interest-free and low interest loans, then it is not a taxable benefit.

40. Home Purchase Loan (continued)

Once a home-purchase loan is established, the prescribed interest rate remains in effect for a period of five years. The amount of interest you calculate as a benefit should not be more than the interest that would have been charged at the prescribed rate when the loan or the debt was established.

41. Home Purchase Loan

The taxable benefit the employee receives in the tax year is the total of the following amounts:

a)    the interest on each loan and debt calculated at the prescribed rate for the periods in the year during which it was outstanding

b)    the interest on the loan or debt that was paid or payable for the year by the employer  for this purpose, an employer is a person or partnership that employed or intended to employ the individual and also includes a person related to the person or partnership

minus the total of the following amounts:

c)     the interest for the year that any person or partnership paid on each loan or debt no later than 30 days after the end of the year

d)    any part of the amount in b) that the employee pays back to the employer no later than 30 days after the end of the year

42. Home Purchase Loan (continued)

minus the total of the following amounts:

e)    the interest for the year that any person or partnership paid on each loan or debt no later than 30 days after the end of the year

f)      any part of the amount in b) that the employee pays back to the employer no later than 30 days after the end of the year

43. Prescribed rates

The prescribed rates are released every quarter.

You can find the prescribed interest rates on our website at canada.ca/taxes-interest-rates.

The prescribed interest rate from January 1, 2022 to March 31, 2022 for taxable benefits  for employees or shareholders from interest-free and low interest loans is 1%.

44. Home Purchase Loan (example)

Let’s take a look at an example of how to calculate the taxable benefit for a home purchase loan.

Olena takes a loan from her employer for $100,000 in January of 2022. The prescribed rate for the loan is at 1% for 5 years. Let’s calculate the taxable benefit that Olena will declare.

Olena’s employer takes $100,000 and multiplies it by the interest rate of 1%. This totals $1000. Her employer then multiplies this by ¼ as they only calculate her benefit once a quarter. This is because the prescribed rate changes every quarter.

For the first quarter of 2022, Olena’s employer will mark her taxable benefit at $250 for a home purchase loan. For the fiscal year, Olena will sum all of the quarter taxable benefit amounts which gives her $1000 in taxable benefits for the 2022 fiscal year.

Olena’s employer would mark $1000 in box 14 of her T4 as well as in box 36 for low or interest free loans.

45. Home-relocation loans

A home-relocation loan is a loan you give to an employee or an employee's spouse or common-law partner when they meet all of the following conditions:

• The employee or the employee's spouse or common-law partner moves to start work at a new location in Canada
• The employee or the employee's spouse or common-law partner uses the loan to buy a new residence that is at least 40 kilometres closer to the new work location than the previous home

46. Home-relocation loans (continued)

• The employee or the employee's spouse or common-law partner receives the loan because of the employee's employment
• The employee designates the loan as a home-relocation loan, and
• The loan is used to acquire a residence or a share of the capital stock of a co-operative housing corporation acquired only to obtain the right to inhabit a residence owned by the corporation. The residence must be for the habitation of the employee and be their new residence

47. Home-relocation loans (continued)

We calculate a home-relocation loan taxable benefit the same way we do for a home purchase loan. Here is a quick recap. To calculate the benefit, add the following

a)    The interest on each loan at the prescribed rate

b)    Any interest the employer paid on behalf of the employee

Minus

c)     The interest paid by any person or partnership

d)    The interest paid for by the employee back to the employer

48. Canada Pension Plan (CPP) & Employment Insurance (EI)

As mentioned earlier in the webinar, it is possible that a worker’s employment is not insurable. But it is also possible that a worker’s employment is not pensionable as well, meaning that the employer does not have to deduct CPP from their worker’s remuneration.

It is possible to request a CPP/EI ruling. To learn more, visit canada.ca/cpp-ei-rulings.

While the ruling is called a CPP/EI rulings, it is also to determine the nature of the employee-employer relationship, therefore, will also determine the status of the benefits themselves.

49. Requesting a CPP/EI ruling

In order to request a ruling, file an appeal on a ruling, or use any other CRA services, a worker can register for their own “My Account for Individuals Online.”

A payer can also access these services by using the “My Business Account” services on the CRA’s website.

50. Recap of Pertinent Information

Today, we covered the following items:

• Definition of benefits
• Payroll Implications
• Distinction between allowance, advance or reimbursement
• What is considered a travel benefit?
• What is considered a housing benefit?
• Special work sites and remote work locations
• Special circumstances to reduce the value of benefit
• Home purchase loans

51. Thank You!

Tax administration is complex. If the content today doesn’t quite fit your situation, please:

• Visit our website
• Visit Canada.ca/cra-liaison-officer to get free tax help from a liaison officer
• Call CRA's business enquiries line at 1-800-959-5525
• You can also go to canada.ca/cra-videos where you’ll find all our business webinars.

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