CALCULATING AUTOMOBILE TAXABLE BENEFITS

An employee or owner-manager of a corporation may use a vehicle supplied by the corporation for purposes other than the corporation's business. The shareholder's personal use of a vehicle that is either owned or leased by the corporation is a taxable benefit.

The taxable benefit is total of Standby Charge and Operating Expense Benefit.

Standby charge

The standby charge represents the benefit employees/shareholders enjoy when your automobile is available for their personal use. It is calculated differently depending on whether you own or lease the automobile.

If the car is owned by a corporation the standby charge is equal to 2% per month multiplied the cost of car including GST and PST.  If the car is leased the standby charge is equal to 2/3 of monthly lease cost.

Example: Car cost is $30,000 (including GST & PST).

Taxable benefit for standby charge per month is 2% * $30,000 = $600 or $7,200 per year. This amount is reported on T4 or T4A and included in personal income of employee.

Reduced standby charge

If a car is used for more than 50% of the time for business purposes and the kilometers for personal use do not exceed 1,667 per 30-day period for a total of 20,004 kilometers per year the amount of standby charge is reduced.

The reduced amount equals stand by charge calculated under general rules times fraction of A/B

            A = total personal kilometers

            B = 1,667 kilometers multiplied number of months employee used the car (20,004   per year)

Example continued: Personal kilometers = 9,000, Business kilometers = 12,000. Car was used for 12 months

$7,200 *9,000km/20,004km = $3,239

Operating Expense Benefit

If a corporation pays any operating expenses of the car (i.e. gas, insurance, repairs) an employee will be assessed a taxable benefit at rate 24 cents per personal kilometer (in 2009)