Mileage - Business and Personal
BUSINESS PURPOSE
GRA Mileage Rate Canada Automobile Allowance Rate
The Canada Revenue Agency allows residents to deduct business mileage on a cost per kilometer basis when the expenses are incurred for a business purpose. This is known as the CRA Mileage Rate or the Automobile Allowance Rate and has to be calculated every year.
Income Tar Act of Canada sets out the following amounts per kilometer that may be deducted by the employer and paid tar-free to employees or officers as reimbursement for motor vehicle expenses incurred while traveling for business purposes, using their personal vehicle:
A vehicle allowance will be considered a taxable benefit if an employee or officer is paid:
- A per-kilometer rate that Canada Revenue Agency considers too high or too low and thus not reasonable
- A flat rate motor vehicle allowance that is not based on the number of kilometers driven
- An allowance that is a combination of flat-rate and reasonable per-kilometer allowance that covers the same use for the vehicle
Both reasonable allowances and triable allowances are deductible by the employer.
These days there are so many apps available in the market for automatic mileage calculation. Some of them are QuickBooks Mileage Calculator - Mile Q. SherpaShare, and Everlance. Users report that these apps are simple, more intuitive, and easy to use mileage tracking apps.
PERSONAL PURPOSE
However, personal use of the vehicle supplied by the employe, or person related to the employer is a taxable benefit. Using a vehicle supplied by the employer, or person related to the employe, for purposes other than the employer's business is considered personal use of the employer-provided vehicle, whether it is armed or leased by the employe, and is a taxable benefit to the employee.
Personal are includes driving between the employee's personal residence and their regular place of work as well as any unexpected trips arising as a result of a call to return to work outside the regular hours of employment.
Regular place of employment
Generally, a regular place of employment is any location at which or from which the employee regularly (as a rule) reports for work. The regularity of the reporting and the nature of the duties when determine whether a location is a regular place of employment.
By that logic, a regular place of employment can be an office in the home. If an employee is required. have an office at home and that is where their employment duties are based, that office would become the individuals regular place of work. Consequently, the travel from their residence to another location (other than the employer's) in connection with the employment duties would be business related and not personal.
To summarize, a regular place of employment is a work location where the employee, in connection with their duties, files reports, receives instructions or employment information or performs other employment related duties.
Exception-Primary and secondary place of reporting
Dan employee's regular place of work is their home office but they are required to regularly attend staff and other meetings at the main office, then their home office serves as their primary regular place of reporting and the main office becomes a second regular place of employment because the employee is viewed as having two locations from which they regularly perform the duties of employment. Consequently, travel between the home office and the main office is personal in that they are traveling from home to a regular place of work even though they only report to the main office once or twice per month.
Multiple regular places of reporting
Sometimes the employee may be required to report to more than one regular place of employment and hence, the place of employment can change from time to time because of the nature of the employment situation.
Examples -
- Sales manager responsible for visiting retail stores within the region and who must also report once a week to the head office store where he has an office
- Construction worker traveling from their home to the regular job sites directly, between job sites during the course of the workday, and home from another job site at the end of the day. The travel from home to the job site and from the job site to home is considered personal travel and travel between job sites during the course of the workday would be business related.
It is important to note that in the examples given above, the places of reporting are either regular job sites or stores within a certain region.
For more clarity, consider the example below -
A worker travels from home to different field locations to undertake meter readings.
Scenario - The worker travels from home to various customer's locations to read the meters - In such a case, the first and last trip (from and to home) would be considered to be business travel as well as all trips in-between.
Scenario - The worker travels to read the employer's specific meters in various locations in a certain area, perhaps every week or so, the locations would likely be regular places of employment and as such, the first and last trip (from and to home) would be personal travel.
In the first situation, the travel is not considered to be personal given that the various customer locations are not regular places of employment, whereas the travel in the second scenario is considered personal because it is travel to a regular place of employment even though it is only done periodically.
Logbooks
Employers, employees, and shareholders are required to keep sufficient records to determine the business and personal use amounts of the total kilometers driven in a calendar year by an employee or a person related. the employee.
Details of personal use like the date, the destination and purpose, name and address of the client, and the distance travelled for each trip should be maintained by an employee in a logbook daily to be able justify the business portion of the travel during the period.
Written by Ruchi Joshi