An automobile allowance paid by an employer to his employee is taxable to the employee, unless it is based on actual kilometers driven by the employee. For example, a flat monthly car allowance of $500 would be a taxable benefit to the employee, and should be included in the employee's T4 slip.
For an employer provided car allowance to be tax-free to an employee, it must beet the following conditions:
- The allowance is based only on the number of business kilometers driven in a year.
- The rate per-kilometer is reasonable. For 2013, the CRA considers this to be:
- 54¢ per kilometer for the first 5,000 kilometers driven; and
- 48¢ per kilometer driven after that.
- You did not reimburse the employee for any car expenses (except for toll charges and parking)
