New rules for compassionate care leave; Determining if an auto allowance is taxable
New rules for compassionate care leave
QUESTION: I understand the federal government has increased the amount of unpaid time off work employees may take for compassionate care leave. Do employers across Canada have to change their policies so they comply with the new federal rules?
ANSWER: On Jan. 3, the federal government increased the number of weeks in which eligible individuals may receive employment insurance (EI) benefits for compassionate care leave from six weeks to 26 weeks. At the same time, it amended the compassionate care standards in the Canada Labour Code to align them with the new EI rules.
As a result, employees covered by the code may now take up to 28 weeks off work, without pay, for compassionate care leave. Previously, employees were entitled to eight weeks off.
The changes to the code only apply to employers and employees in federally regulated workplaces, such as banks, airlines and railways. Other employers and employees are covered under the employment standards laws that apply in the jurisdiction in which they operate/work.
It is up to each provincial/territorial government to decide if it will amend its employment standards rules to extend the period of leave for compassionate care.
To date, only Nova Scotia has amended its Labour Standards Code to increase the maximum amount of leave for compassionate care from eight weeks to 28 weeks. The change took effect Jan. 3.
Manitoba has tabled amendments to its Employment Standards Code to increase the period of compassionate care leave from eight weeks to 28 weeks, effective April 1.
So far, in other jurisdictions, with the exception of Quebec, the maximum amount of leave is still eight weeks. In Quebec, the period of leave is 12 weeks. It increases to 104 weeks in that province for employees caring for a child under 18 years of age who has a fatal illness.
Determining if an auto allowance is taxable
QUESTION: We pay employees an automobile allowance that includes a flat-rate monthly component for travel inside of a specific geographic area and a per-kilometre rate for work-related travel outside of that area. Is the allowance taxable?
ANSWER: You have two allowances to consider. Since the flat-rate component and the per-kilometre portion cover different uses of employees’ automobiles, the Canada Revenue Agency (CRA) requires that the two components be looked at separately.
The flat-rate allowance is taxable since it is not tied to the number of kilometres driven for work. As a result, the employer must include it in the employee’s income for calculating Canada/Quebec Pension Plan (C/QPP) contributions, employment insurance (EI) premiums, Quebec Parental Insurance Plan (QPIP) premiums (if applicable) and income tax deductions.
For year-end reporting, include the allowance in box 14 on a T4 and in the “Other Information” area on the form, using code 40. For Quebec, report it on an RL-1 in boxes A and L.
The per-kilometre allowance may or may not be taxable, depending on whether the CRA considers it reasonable. “Reasonable” per-kilometre automobile allowances are not taxable and, therefore, are not subject to source deductions.
When determining if a per-kilometre allowance is reasonable, the CRA generally takes into consideration the type of vehicle an employee drives and the driving conditions.
For the CRA to consider an allowance to be reasonable, the allowance must be based only on the number of business kilometres an employee drives in a year, the per-kilometre rate the employer pays must be reasonable and the employer must not reimburse the employee for expenses related to the same use of the automobile (exceptions apply for reimbursements for toll or ferry charges or supplementary business insurance if the employer calculated the allowance without including them).
When considering if a per-kilometre rate is reasonable, the CRA uses amounts prescribed in federal Income Tax Regulations for determining the maximum amount that can be deducted as a business expense.
The Canada Revenue Agency suggests that employers use the rates as a guide when determining if their per-kilometre allowances are reasonable.
For 2016, the rates are 54 cents per kilometre for the first 5,000 kilometres driven and 48 cents for each additional kilometre (except for the Yukon, Northwest Territories and Nunavut, where the tax-exempt allowance is 58 cents for the first 5,000 kilometres, and 52 cents for each additional kilometre).
If a per-kilometre allowance is not reasonable, it is taxable and the employer must include it in the employee’s income for calculating source deductions.
For year-end reporting, employers should include the allowance in box 14 on a T4 and in the “Other Information” area on the form, using code 40.
For Quebec, report it on an RL-1 in boxes A and L.