Standby charges and HST owing

If your corporation owns a passenger vehicle that is driven home by an employee then you have to calculate a standby charge and put it on the employees T4 as a taxable benefit.

There is a calculation which is based on 2% per month of the original cost (plus HST) of the vehicle, plus a per km charge for personal km driven by the employee. If you lease the vehicle then the calculation starts with 2/3 of the monthly lease payment.

The standby charge being based on the original cost of the vehicle does not reduce as the vehicle gets older, which might seem a touch unfair.

The number of personal kilometers driven by your employee includes their trip from home to work.

The per km operating benefit is only charged if the employee does not pay for gas, insurance etc.

Most employers know about the standby charge and operating cost benefit.

Fewer employers pay attention to the amount of HST that is included in the standby charge and on the operating cost benefit. This is not something you should calculate on your own. This HST must actually be sent to CRA. The concept being that you would not have been entitled to HST on the personal portion of this vehicle’s use – so now you need to pay it back.

Your job as an employer is to make sure that mileage logs are being kept for any vehicles that are owned by your corporation and to let whoever does your T4’s know about these vehicles.

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Painless Financial Training Group Inc. with Debi Peverill

Understand Financial Stuff, Painlessly