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Department of Finance temporarily adjusts automobile standby charge for the 2020 and 2021 tax years

February 1, 2021

The effect the ongoing COVID-19 pandemic has had on businesses by way of lockdowns and declines in general business activity has been immeasurable. As many businesses experience declines in activity, the trickle-down has also impacted employees who have seen a reduction in their business or personal mileage use for their employer-provided automobile. 

As a result, the Department of Finance recently proposed to temporarily adjust the automobile standby charge for the 2020 and 2021 taxation years due to the COVID-19 pandemic. These adjustments would allow employees who have been provided with an automobile by their employer in 2019, 2020, and 2021 to use their 2019 automobile usage to determine whether they used their automobile mainly for business use in order to receive the reduced standby charge in 2020 and 2021.

Note: Only employees who were provided with an automobile by the same employer in 2019 and meet the following conditions are eligible.

  • The employee is using their employer-provided automobile in connection with their employment
  • The automobile is being used for business purposes for more than 50% of the time
  • Personal use mileage does not exceed 1,667 kilometres per thirty-day period, for a total of 20,004 for the year.

The proposed adjustment may also impact how the operating cost benefit is calculated for these employees. The operating cost benefit relates to an employee’s personal portion of the expenses incurred by the employer in relation to the use of the automobile, such as insurance, fuel, and general maintenance.

The default calculation of the operating cost benefit is $0.28 per personal use kilometre for 2020 and $0.27 for 2021. However, if certain conditions are met, an employee has the option to use 50% of the standby charge by advising their employer.

The proposal also states that employees who are eligible for the optional calculation of the operating expense benefit for 2020 and 2021 do not have to advise their employer before the end of the tax year. In its place, an employee’s operating cost benefit would be calculated as the lesser amount using the per-kilometre rate, or the optional calculation.

To learn more about the temporary adjustment to the automobile standby charge, please click here.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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