Ask an accountant: Employment benefits

Francesca Giroux, CGA
For the Lakeside Leader

When are gifts or awards provided to an employee considered to be a taxable benefit? Cash and near-cash gifts (i.e. gift cards) are always considered to be a taxable benefit, as are company owned points that can be redeemed for air travel or other rewards. Non-cash gifts/awards, those where there is no element of choice in the gift (i.e. tickets to a specific concert or sporting event), may not be considered to be a taxable benefit under certain conditions. The conditions include that the item be given for a special occasion such as a holiday, birthday, and wedding or for an employment-related achievement such as outstanding service or exceeding safety standards. If a non-cash gift or award is given for any other reason it will be a taxable benefit. Performance related awards are taxable as they are treated as additional remuneration for the job the employee was hired to do.

As of January 1, 2010 the number of tax-free non-cash gifts and awards given in a single year are not limited, rather the limitation is placed on the total value of the gifts and awards. An employer is allowed to give an employee up to $500 tax-free in non-cash gifts and awards per year; anything above the $500 limit is subject to tax. In addition, once every five years an employee can receive a non-cash long service/anniversary award valued at $500 or less, tax free. The award must be for a minimum of five years of service, and any amount over the $500 is considered to be a taxable benefit.

Trivial items such as mugs, pens, and T-shirts with employer’s logos are not subject to tax. The value of a gift or award to be included in the employee’s income is the fair market value of each gift including GST, not necessarily its cost to the employer. Taxable amounts are subject to income tax and CPP contributions. EI premiums must also be deducted if the gift is cash.

Please write in with your questions to bonnie@nashgirouxllp.ca.

Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CPA for information specific to your own needs.

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