A taxable benefit is a non-cash perk an employer provides that the CRA treats as employment income, added to the employee's pay and reported on their T4.
When an employer provides something of personal value, a company car for personal use, employer-paid personal insurance, gift cards, low-interest loans, the CRA generally treats it as a taxable benefit. Its value is added to the employee's income, appears on the T4, and is often subject to CPP and sometimes EI and GST/HST.
Not everything is taxable: certain non-cash gifts under an annual threshold, reasonable per-kilometre allowances, and some employer-provided training can be exempt. Getting benefit calculations right, especially the automobile standby charge and operating benefit, is a common payroll pain point and a frequent audit focus.
An employer gives an employee personal use of a company car. The standby charge and operating benefit, say $6,000 for the year, are added to the employee's T4 income and taxed as if they were extra salary.
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