Calculating 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.

Operating expenses include:

  • gasoline and oil;
  • maintenance charges and repair expenses, less insurance proceeds; and
  • licences and insurance.

Operating expenses do not include:

  • interest;
  • capital cost allowance for an automobile you own;
  • lease costs for a leased automobile; or
  • parking costs, highway or bridge tolls.

If you pay any amount of operating expenses, you have to determine the operating expense benefit by using either the optional or fixed rate calculation.

Optional calculation

You can choose this method to calculate the automobile’s operating expense benefit if all of the following conditions apply:

  • You include a standby charge in your employee’s income.
  • Your employee uses the automobile more than 50% of the distance driven in the course of his or her office or employment.
  • Your employee notifies you in writing before the end of the tax year to use this method.

If all of these conditions are met, calculate the operating expense benefit of the automobile at half of the standby charge before deducting any payments (reimbursements) your employee or a person related to your employee makes. In some cases, this optional calculation may result in a higher benefit amount than the fixed rate calculation.

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