29 September 1994 Internal T.I. 9418047 - EMPLOYMENT BENEFITS - EMPLOYER PROVIDED AUTOMOBILE

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

In situations where 6(1)(k) has application but the employer pays only a portion of the personal operating expenses of the automobile, can an alternative calculation of the operating cost benefit be made?

Position TAKEN:

No!

Reasons FOR POSITION TAKEN:

The wording of 6(1)(k) precludes any alternative calculations of the operating cost benefit other than the options already described within that provision

			September 29, 1994

	Vancouver District Office	Head Office
	Client Assistance Division	Rulings Directorate
J. A. Szeszycki
	Attention: P. Abdulla
		941804

Operating Cost Benefit
Employer Provided Automobile

This is in reply to your memorandum of July 13, 1994 in which you asked us to review the attached correspondence received from the City of XXXXXXXXXX concerning the computation of automobile benefits in light of the legislated changes reflected in new paragraphs 6(1)(k) and 6(1)(l) of the Income Tax Act (the "Act").

The situation for one particular group of City employees is that the employees are being provided City leased vehicles, the employees are paying all the operating expenses for the vehicle and are being reimbursed for the business portion of those expenses. The sole exception is the payment by the employer of both the business and personal portions of the vehicle insurance costs. It is presumed from your submission that the vehicle in question is an automobile, as that term is defined in subsection 248(1) of the Act.

The payment by the employer of a personal automobile operating cost of the employee brings the employee within the application of new paragraph 6(1)(k) of the Act. It requires that, if the amount of personal automobile expenses is not reimbursed in full within 45 days of the end of the year, the operating cost benefit is computed as 12 cents per personal kilometre driven unless the extent of business usage exceeds 50% and the employee optionally elects to include one-half the standby charge as the operating cost benefit. In circumstances where the conditions in subparagraphs 6(1)(k)(i), (ii), and (iii) are met, the computation set out in the remainder of paragraph 6(1)(k) applies. The legislation does not provide for the use of any alternative calculations in the calculation of the operating cost benefit under these circumstances. Coincident with the introduction of paragraph 6(1)(k) was the amendment to subparagraph 6(1)(a)(iii) of the Act to remove the calculation of the benefit under that provision.

We hope our comments will clarify the position being taken by the Department in these situations.

P.D. Fuoco
Section Chief
Personal and General
Business and General Division
Rulings Directorate
Policy and Legislation Branch