Non-Taxable Benefits for Employers in Canada

 In the current atmosphere of low unemployment rates and labor shortages in many industries, offering a competitive salary package to employees might mean the difference between getting a highly sought-after applicant for your company.

In Canada, cash salaries and earnings are taxed as employment income and are reported on an employee's T4 slip for tax purposes. On the other hand, several perks and allowances may be provided to an employee on a non-taxable basis.

The Canadian Revenue Agency (CRA) defines a benefit as personal goods or services that you offer or supply to your employees (or a close relative of the employee - spouse, child, or sibling). Benefits include allowances and reimbursement of an employee's personal costs.

We'll go through the top 10 non-taxable benefits that you may provide your employees as an employer in this post.

Advantages That Aren't Taxable

1. Cellular phone and internet services:

If you provide your employees with a mobile phone that you own to conduct their business, the acquisition of the device is not considered a taxable benefit. However, if you reimburse your employees for purchasing their own devices, the reimbursement is a taxable benefit to the employee. You can reimburse your employees for the cost of cell phone and internet usage to help them with their jobs. The pay for service costs is not taxable.

2. Education and Professional Development Expenses: 

Tuition, textbooks, meals, travel, and housing expenses that are specifically committed to improving or maintaining your employees' talents are non-taxable benefits.

3. Payment of Professional Fees: 

Professional dues remitted to employees that benefit you as the employer are non-taxable benefits.

4. Dues to the Club and Recreational Facilities:

Maintaining the health of your employees via exercise may increase productivity and morale. Expenses paid by an in-house gym/recreational facility or arranging for your employees to use a recreational facility are not considered taxable benefits if the employer is the primary receiver.

5. Prizes and awards:

In most cases, non-cash gifts and prizes worth less than $500 per year are not taxable benefits. The $500 limit does not apply to inconsequential gifts like business-branded clothes, mugs, or coffee. Long-serving employees can be rewarded with non-cash gifts worth up to $500 every five years. Furthermore, these long-service bonuses are tax-free. The $500 annual limit does not apply to the long-service incentive.

6. Automobile Allowances: 

If your automobile allowance is based on business usage miles at a reasonable CRA-approved mileage rate, you may treat your employees fairly. You can use the CRA's online calculator for automobile perks to calculate the benefit. Employees' salaries will be increased if a rate is determined to be inappropriate. If your employee is disabled or requires a car on a regular basis for work purposes, the parking spaces you provide them are taxed as well.

7. Counseling Services:

 If it's for re-employment or physical/mental health, employees can seek counseling services as a non-taxable benefit.

8. Loyalty Points:-

Employees are frequently exempt from paying taxes on credit card loyalty points gained through company expense reimbursements. If the points are converted into cash or purchased as part of a tax-avoidance plan, the value of the points will be considered a taxable benefit.

9. Plan for Private Health Services:

 The premium you pay on behalf of your employees for private health and dental care plan is considered a non-taxable benefit for them.

10. Short- and long-term disability insurance: 

Premiums paid on behalf of your employees for short- and long-term disability insurance are not taxable benefits. The benefit is taxable to the employee if he or she files a claim and gets a disability insurance payment.

Consult the CRA's T4130 Employer's Guide for more information, which contains a comprehensive list of both non-taxable and taxable benefits. The inclusion of GST/HST will be required for some taxable benefits. Once you've calculated the value of the taxable benefits and the GST/HST, you'll need to calculate payroll deductions.

If you have any questions concerning benefits, payroll, or the tax law, we can help. Mindspace can help you manage your company's payroll and tax obligations!