Where an employee is provided with a company-owned vehicle, the employer is required to calculate a taxable benefit (or standby charge) relating to the employee’s personal use of the vehicle. This benefit is added to the employee’s T4 income, and is subject to normal payroll deductions. The regular standby charge is 2% per month of the original cost of the vehicle or 2/3rds of the monthly lease payment. An additional amount must also be included for the operating expenses paid for by the employer (e.g. gas, repairs, insurance, etc.). This operating cost benefit is usually calculated at a prescribed rate for each personal kilometre driven (for 2003, it is $0.17 per km).

Based on proposed legislation for 2003 and subsequent years, the standby charge can be reduced where annual personal driving does not exceed 20,000 kilometres and the vehicle is used at least 50% of the time for business purposes.

This change may significantly reduce taxable benefits for employees in many cases. It may also impact the decision whether to buy or lease a vehicle personally or to have your company acquire the vehicle. Please contact your DJB tax advisor for advice regarding your own circumstances.