9 September 1997 External T.I. 9713235 - CAR ALLOWANCE

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:

Whether travel allowance for local members who are travelling to a work site outside their local's jurisdiction is tax-exempt.

Position:

No.

Reasons:

The allowance is paid for commuting between the residence and the work site.

XXXXXXXXXX	                                 	971323

Attention: XXXXXXXXXX

September 9, 1997

Re: Automobile Allowance Paid to an Employee

This is in reply to your letter of May 6, 1997, in which you ask whether your local's contract rate of XXXXXXXXXX is a taxable or non-taxable benefit to the employee who travels 88 kilometres a day. The distance is measured from XXXXXXXXXX to the work site and not from the employee's home. You make reference to the Department of Finance Press Release 96-103 which announced an increase in the tax-exempt kilometre limit as set out in section 7306 of the Income Tax Regulations (the "Regulations") to 35 cents for the first 5000 kilometres and 29 cents for each additional kilometre.

The costs associated with commuting between work and one's residence is a personal expense and an allowance paid by the employer to compensate an employee for such an expense is included in the employee's income in the year received pursuant to paragraph 6(1)(b) of the Income Tax Act (the "Act"). Although certain automobile or travel allowances are exempted from tax in accordance with subparagraphs 6(1)(b)(i) through (ix) of the Act the situation as you describe it does not fit any of these exceptions. In particular subparagraph 6(1)(b)(vii) of the Act excludes from income reasonable allowances for an employee's travel expenses (other than for the use of a motor vehicle) for travel away from the employee's ordinary work place; and subparagraph 6(1)(b)(vii.1) of the Act exempts a reasonable allowance for use of a motor vehicle for travelling in the performance of the employment. For more information on these exemptions, please refer to paragraphs 48 and 49 of Interpretation Bulletin IT-522R ("Vehicle, Travel and Sales Expenses of Employees"). (Copies of Interpretation Bulletins are available from your local tax services office or on the Internet at the following site - http://www.rc.gc.ca).

In addition, travel expenses relating to a special work site or remote location may be excluded from the employee's income pursuant to subsection 6(6) of the Act but only where, among other things, the employee is required to be away from his or her principal place of residence for a period of not less than 36 hours (see paragraph 53 of the aforementioned Interpretation Bulletin and Interpretation Bulletin IT-91 "Employment at Special or Remote Work Sites").

To conclude, an allowance for the expenses of the daily commute to the work site are not exempted from tax by the above-mentioned provisions. This is so even where the employee normally reports to work sites within a certain geographical region and only exceptionally is hired to work outside your local's jurisdiction.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch