Francesca Giroux, CPA
For the Lakeside Leader
A taxable benefit has to be included in an employee’s income. In certain situations the payment, reimbursement, or subsidization of the fees for the use of a recreational facility or club by an employee gives rise to a taxable benefit. For example, when an employer pays for, reimburses or subsidizes membership fees for an employee at a local swimming pool, gym, or exercise room the payment gives rise to a taxable benefit.
If you provide your employee with a cell phone for use in employment duties, the business use of the phone is not considered to be a taxable benefit. The personal use portion of the cell phone bill should be calculated and included in the employee’s income as a taxable benefit. The benefit is calculated as the fair market value of the cell phone services less any amounts that your employee reimburses you, less the business use portion. However, there are certain conditions in which the employee’s personal use is not considered to be a taxable benefit. In order for personal use of a business cell phone not to be considered a taxable benefit to the employee all of the following conditions must apply: the plan’s cost is reasonable; the plan is a basic plan with a fixed cost; and your employee’s personal use of the service does not result in additional charges above the basic plan cost. It is the employer’s responsibility to support their claim for percentage of business use and the value of the plan.
Remember that if a benefit is taxable, it is also pensionable, which means that CPP contributions and income tax should be deducted. If the taxable benefit is paid in cash, deduct EI premiums. Non-cash benefits are not insured; therefore, not subject to EI premiums. Taxable benefits must be reported on the T4 slip of the employee in box 14 “Employment Income” and in the “Other Information” area under code 40.
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Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CGA for information specific to your own needs.