Travel assistance benefits paid in a prescribed zone

If you provide an employee with travel assistance in a prescribed zone, the benefit is taxable unless it was for business travel. The travel assistance could be for such things as vacation, bereavement, medical, or compassionate reasons.

If employees travel using transportation that you own or charter, determine the value of the benefit by assigning a fair market value to the transportation.

When employees travel by some means other than air, the cost of travel may include automobile expenses, meals, hotel and motel accommodations, camping fees, taxi fares, and road and ferry tolls.

When you give employees travel assistance benefits other than cash or refundable tickets (such as travel warrants, vouchers, or non-refundable tickets), the employees do not receive any benefit until they or members of their household take the trip. The benefit is income for the employees in the year the trip starts, and you should report it in that year.

There are many ways of providing travel assistance benefits. You can pay your employee a travel allowance before the trip, such as a certain amount per hour, or on some other periodic basis. You can also make lump-sum payments to your employee before or after the trip is taken. You should report such payments in your employees' income in the year he or she receives them, no matter when your employee or members of his or her household travel.

You have to report these benefits in box 14, "Employment income," and in the "Other information" area under code 32 at the bottom of the employee's T4 slip. For more information, see T4 slip.

If you are a third party who supplies travel benefits to the employee of another employer, report these benefits under code 028 "Other income", in the "Other information" area at the bottom of the T4A slip. For more information, see T4A slip.

An employee who qualifies for the Northern residents travel deduction will use this amount to calculate his or her claim. An employee can claim two trips per year, unless the trips were for medical reasons. Therefore, you have to show the value of the medical travel benefits separately on the slip. For more information, see Medical travel assistance paid in a prescribed zone.

If the travel assistance is a taxable benefit, include any GST/HST that applies in the value of the benefit. Do not include the GST/HST in the value of the travel allowances.

Payroll deductions

When travel assistance benefits are in the form of non-refundable tickets or travel vouchers, you have to make payroll deductions when the benefit becomes taxable, i.e. when the employee or member of their household takes the trip. However, when you give travel assistance in the form of cash, we consider it to be a cash advance, and you have to make the payroll deductions  when the advance is paid to the employee.

You may waive the requirement to deduct income tax from the full travel assistance payment you give to your employee who lives in a prescribed northern zone (or from 50% of the payment received by an employee who lives in a prescribed intermediate zone). To do this, the employee has to agree, in writing, to use the payment entirely for vacation or medical travel when he or she receives it. If the employee does not agree, you have to deduct income tax.

Whether or not you have to make income tax deductions, you have to deduct CPP contributions and EI premiums on cash payments.  You have to deduct CPP contributions on non-cash benefits if the employee also receives cash remuneration from you during the year. If the non-cash benefit is the only form of remuneration you provide to your employee in the year you do not have to make payroll deductions.

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