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Adjustments to the Automobile Standby Charge due to COVID-19
January 27, 2021
On December 21, 2020, the Department of Finance Canada released a backgrounder and draft legislation to provide temporary relief in respect of employee automobile benefits for the 2020 and 2021 taxation years due to the impact of COVID-19.
Business lockdowns, reduced business activity, and other changes to our daily and business lives throughout the pandemic, may result in an employee’s business or personal mileage being reduced compared to a normal year. If employees have used the automobile substantially less for business purposes during the pandemic, they may no longer qualify for the reduced standby charge for tax purposes, even though their personal driving use might be similar or less than last year.
To address this issue, the government will allow employees to use their 2019 automobile usage to determine whether they are eligible for the reduced standby charge in 2020 and 2021. Please note only employees with an automobile provided by the same employer as in 2019 would be eligible for this option.
The employee would be able to access the reduced standby charge for 2020 based on their 2019 usage as business use was greater than 50% in 2019.
However, the employee’s reduced standby charge for 2020 would still be calculated using the employee’s actual personal kilometres driven in 2020.
Similarly, employees will be able to use their 2019 automobile usage to determine whether they are eligible for the optional operating expense benefit calculation.
For 2020 and 2021, employees eligible for the optional calculation of the operating expense benefit, would be entitled to the new treatment without having to notify their employer. Instead, an employee’s operating expense benefit would be the lesser of the amount determined using the per-kilometre rate, or using the optional calculation.
These measures would be effective for the 2020 and 2021 taxation years.
Please contact us for further assistance with these matters.
The information provided on this page is intended to provide general information.