On this page

• Determine if the benefit is taxable
• Calculate the value of the benefit
• Withhold payroll deductions and remit GST/HST
• Report the benefit on a slip
• References

Determine if the benefit is taxable

Generally, fees for financial counselling services or income tax preparation you provide or pay on behalf of your employee are taxable. Depending on the situation, the benefit from certain counselling services may not be taxable under the Income Tax Act (ITA).

Situations

Situation: You pay for counselling services related to the mental or physical health of your employee or a person related to your employee

Non-taxable situation

Certain benefits for counselling services in respect of the mental or physical health of your employee or a person related to the employee are not taxable under the ITA. These include:

• Dealing with addictions, such as tobacco, drug and alcohol abuse
• Stress management

These types of counselling services may be provided directly by you or through an employee assistance program.

Taxable situation

If the benefit relates to amounts paid for the use of a recreational facility or club, including situations where that membership provides an employee or a related person with access to counselling services, the benefit is taxable.

Examples

• Not taxable: Option 1

  • You decide to pay for counselling on behalf of any staff member who would like to stop smoking. Your employee decides to take the employer-paid counselling. The benefit is not taxable in this situation.

• Taxable: Option 2

  • You offer a range of counselling services to your employees. Your employees may book sessions with a range of service providers. An employee hires a personal trainer for ten sessions. You reimburse the employee for half the cost. The benefit is taxable in this situation.

Continue to Calculate the value of the benefit.

Situation: You pay for the cost of counselling services related to the re-employment of your employee

Non-taxable situation

Benefits from counselling services in respect of the employee's re-employment are not taxable under the ITA.

Taxable situation

Counselling services are different from educational or training services. If the fees paid are for the retraining of an employee in the event of termination where it is not primarily for the benefit of the employer, the benefit is taxable.

Continue to Calculate the value of the benefit.

Situation: You pay for the cost of counselling services related to the retirement of your employee

Non-taxable situation

Benefits from counselling services in respect of your employee's retirement are not taxable under the ITA.

Example

A company is downsizing due to declining sales. It is offering a retirement package to an employee who has been employed with the company as a salesperson for 25 years. The retirement package includes a one-day counselling seminar to prepare for retirement. The benefit is not taxable in this situation.

Situation: You pay for services related to financial counselling or income tax preparation

Taxable situation

If you pay for services related to financial counselling or income tax preparation, the benefit is taxable. This includes:

• Financial counselling on specific investments or investment strategies
• Income tax preparation for personal tax returns or personal tax planning
• Services through your accounting firm, or your employee or shareholder is reimbursed for the expense
• Services for the preparation of out-of-country tax returns for an employee or shareholder

Continue to Calculate the value of the benefit.

Calculate the value of the benefit

If the benefit is taxable, the value of the benefit is equal to:

• Fair market value of the benefit received or enjoyed
• -minus Any amounts your employee reimbursed you
• =eqauls Value of the benefit to be included on the T4 slip

Example 1 – No calculation

An employer has a contract with a service that provides employee counselling. Employees may use the service for issues related to their physical and mental health. Employees schedule appointments directly with the counsellor, but the employer is billed for the service. An employee, who has been dealing with stressful events in their life, books 6 appointments in the year. The employer is billed $120 for each appointment for a total of $720.

The amount paid by the employer is not a taxable benefit because the benefit is for counselling services in respect of the physical or mental health.

You do not need to do any calculations.

Example 2 – No calculation

An employer going through restructuring provides employment counselling services. An employee, who has been terminated, takes advantage of the services and the employer is billed $800 for the services.

The amount paid by the employer is not a taxable benefit because the benefit is for counselling services in respect of the re-employment of the employee.

You do not need to do any calculations.

Example 3 – Calculations

An employer offers counselling for employees. Employees may separately schedule appointments for lifestyle counselling, financial counselling and tax preparation, which are billed directly to the employer. A retiring employee uses the lifestyle counselling for individuals transitioning to retirement, the cost is $400 for 2 sessions. He also uses financial and specific investment planning for $900 over the course of the year as well as a tax preparation of $300.

The amounts paid by the employer are partly taxable because the counselling services includes financial investment planning as well as tax preparation. The taxable benefit is calculated as follows:

• $1,600 ($400 + $900 + $300) is the counselling services fees paid by the employer
• minus $400 is the amount for retirement counselling services that are not taxable
• equals $1,200 ($900 + $300) is the value of the taxable benefit
• minus $0 because the employee does not reimburse the employer
• equals $1,200 is the value of the benefit to be included on the T4 slip

The amounts must be included in the pay period they were received or enjoyed.

Withhold payroll deductions and remit GST/HST

The withholding and remitting requirement depends on the type of remuneration: cash , non-cash , or near-cash .

You must withhold the following deductions:

• Non-cash and near-cash: Option 1

  Withhold:

  • Income tax
  • CPP
  • EI (do not withhold)

  Remit:

  • GST/HST in certain situations

• Cash: Option 2

  Withhold:

  • Income tax
  • CPP
  • EI

  Do not remit:

  • GST/HST

The amounts must be included in the pay period they were received or enjoyed.

Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate – Calculate payroll deductions and contributions.

Report the benefit on a slip

You must report the following amounts on the T4 slip:

• Non-cash and near-cash: Option 1

  Report on:

  • Box 14 – Employment Income
  • Box 26 – CPP/QPP pensionable earnings
  • Code 40 – Other Information

• Cash: Option 2

  Report on:

  • Box 14 – Employment Income
  • Box 24 – EI insurable earnings
  • Box 26 – CPP/QPP pensionable earnings
  • Code 40 – Other Information

Learn how to report the benefit on a slip: Fill out the slips and summaries – File information returns (slips and summaries).

References

Legislation

Cash

Near-cash

Non-cash