Reduce Automobile Benefits

The problem of employer provided automobiles to employees, shareholders, or partners is discussed HERE.

There are tax planning opportunities to mitigate the problem of taxable automobile benefits as follows:

1. Use a personally owned vehicle, not a business owned vehicle for business purposes. This is discussed HERE and HERE. Read both sections for a good overall picture of this tax planning opportunity.

2. If the employer is flexible, an employer-provided car can be replaced with an increased salary. The business use of the vehicle can then be reimbursed tax-free as discussed HERE and HERE again.

3. Keep detailed logs. Without support, CRA may impose unfavourable calculations of benefits. The log must show the total amount of kilometres driven, the dates, the destinations, and the distance driven for business purposes. 

4. Reduce the operating costs benefit by reducing the amount of personal kilometres driven. CRA considers travel from home to the office as personal. However, if a stop for business purposes is made before coming to the office, the whole trip is considered business. Maximize this opportunity by making all your business calls first thing in the morning before you go to work and then again before you go home.

5. Reduce the standby charge by limiting the time a vehicle is available for use. Available for use occurs whenever the employee/shareholder/partner is given custody and control over the vehicle. To reduce the time "made available" consider circumstances such as a family vacation. returning custody and control of the vehicle back to the business during this time reduces the standby charge. 

6. In cases where the personal use of the vehicle is less than 50%, CRA allows the standby charge to be reduced by a fractional amount discussed HERE. The formula calculation is generous and can significantly reduce the standby charge depending on your circumstances. In cases where personal use is low, it may make economic sense to use the employer provided vehicle as opposed to a personally owned vehicle with reimbursement discussed in 1. above. A detailed calculation would need to be done to determine the more beneficial alternative.

Employee/Shareholder benefits are a complicated area and a Chartered Accountant should be consulted. Contact Keith Anderson CA at (780) 447-5830 if you need advice. 

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