Flat-rate allowance

If you pay your employee an allowance based on a flat-rate that is not related to the number of kilometres driven, it is a taxable benefit and has to be included in the employee's income.

Employees may be able to claim allowable employment expenses on their return.

Do not include the GST/HST in the value of this allowance.

Payroll deductions

If the allowance is taxable, it is also pensionable and insurable. Deduct CPP contributions, EI premiums, and income tax.

Reporting the benefit

Report the taxable allowance in box 14 "Employment income" and in the "Other information" area under code 40 at the bottom of the employee's T4 slip. For more information, see T4 - Information for employers.

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