Tax-free motor vehicle allowances
A fixed amount per kilometre can be paid tax-free to employees who have used their personal vehicles for business travelling. This amount is set by the Canadian Income Tax Act and it is important for accountants to stay up-to-date on these numbers.
For the 2016-2017 fiscal years, the ITA has declared that employers can pay this much:
First 5,000 km: $0.54
Over 5,000 km: $0.48
Employers should be aware that vehicle allowances can be taxable if an employee is paid a fixed rate not related to the number of kilometres driven or a rate that the CRA deems to be too low or too high, or a mixture of both rates.
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