Changes reduce administrative burden for employers
This summer, the Government of Canada announced changes to the administrative policies for some taxable benefits and electronic records of employment (ROEs), after much work by and collaboration among members and staff of the Canadian Payroll Association (CPA) and the federal government.
The changes were the result of years of hard work by CPA staff and subject matter experts, says Patrick Culhane, president and CEO of the Toronto-based CPA.
“They are a testament to the strong government relations program that the CPA has developed at the federal level,” he says.
Taxable benefits
Administrative changes made by the Canada Revenue Agency (CRA) to six employee taxable benefits will reduce the administrative burden for employers and support a fair and competitive tax system. The proposed changes will streamline the administration of employer-provided travel within municipalities or metropolitan areas, and employer-provided motor vehicles required to be taken home at night, along with a number of others detailed below.
Non-cash gifts and non-cash awards: Currently, up to two non-cash gifts costing an employer a total of $500 or less are not taxable, as well as up to two non-cash awards costing the employer a total of $500 or less. Effective for 2010, the following changes and clarifications are being made to the CRA’s gift and award policy:
• Non-cash gifts and non-cash awards to an arm’s length employee, regardless of number, will not be taxable to the extent the total aggregate value of all non-cash gifts and awards to that employee is less than $500 annually. The total value in excess of $500 annually will be taxable.
• In addition, a separate non-cash long service or anniversary award may also qualify for non-taxable status to the extent its total value is $500 or less. A value in excess of $500 will be taxable.
Administrative policies around the qualifying nature of gifts and awards will remain unchanged. For example, performance-related rewards (such as sales targets) or cash and near cash awards (such as gift certificates) will continue to fall outside the administrative policy and must be included in the taxable income of the employee.
More details on the qualifying nature of gifts and awards can be found at www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gfts/menu-eng.html.
Overtime meals and allowances provided to employees: The CRA will consider no taxable benefit to arise if:
• the value of a meal or meal allowance is reasonable (up to $17)
• an employee works two or more hours of overtime right before or after his scheduled hours of work
• the overtime is infrequent and occasional in nature.
Loyalty reward programs: Effective for 2009, the CRA will no longer require these employment benefits to be included in an employee’s income, so long as the:
• points are not converted to cash
• plan or arrangement is not indicative of an alternate form of remuneration
• plan or arrangement is not for tax-avoidance purposes.
Surface transit passes provided to family members of transit employees: Effective for 2010, the non-taxation of free or discounted surface transit passes only applies for passes provided to a transit employee for his exclusive use. Free or discounted passes provided to an employee’s family member will represent a taxable benefit to the employee. More information on these changes can be found at www.cra-arc.gc.ca/E/pub/tp/ itnews-40/itnews40-e.pdf.
“These changes increase the efficiency and effectiveness of payroll-related legislation for all stakeholders: Employers, government, employees and the general public. The two most relevant are overtime meal allowances, on which we were consulted, and the new gifts and awards process, which is based on CPA’s long-standing position that it be changed to be consistent with the Quebec model,” says Culhane.
“For example, businesses can recognize employees with items of nominal value tax-free and other gifts and awards up to a total value of $500 per year tax-free. In addition, reducing the number of overtime hours an employee must work to receive a tax-free meal allowance will give businesses more flexibility in the tax treatment of these allowances.”
ROE changes
Changes to the employment insurance (EI) program are intended to ease the administrative burden for employers and ensure workers get their benefits more quickly.
New time frames were implemented to enable employers to issue ROEs in accordance with their pay cycle. Now, employers that file ROEs electronically through online services such as ROE Web can issue an electronic ROE no later than five days after the end of the pay period during which the first day of the employee’s interruption of earnings falls. However, if there are 13 or fewer pay periods per year under an employer’s pay cycle, the electronic ROE is issued either no later than five days after the end of the pay period during which the first day of the employee’s interruption of earnings falls or 15 days after the first day of the interruption of earnings, whichever comes first.
Furthermore, employers filing electronic ROEs do not have to print a paper copy for an employee. The electronic ROEs will go directly into Service Canada’s system and be immediately available to support the corresponding EI claim. This will reduce the processing time for EI benefits.
“The Government of Canada has taken a major step in supporting both employers and employees,” says Culhane. “This change to submitting electronic ROEs within five days after the end of the pay period reduces the administrative and compliance burden on employers, while enhancing accuracy and response time for employees who are applying for EI benefits.”
The CPA will work with counterparts in the federal government to implement the changes announced for taxable benefits and ROEs. It will also continue its federal and provincial advocacy efforts to improve payroll-related administrative processes and reduce the administrative burden for all stakeholders.
Steven Van Alstine is vice-president of compliance programs and services for the Toronto-based Canadian Payroll Association. He can be reached at [email protected].
