You may give a part-time employee a reasonable allowance or reimbursement for travelling expenses incurred by the employee going to and from a part-time job. If so, and you and the part-time employee are dealing at arm’s length, you do not have to include that amount in the employee’s income. This applies to:
- teachers and professors who work part-time in a designated educational institution in Canada, providing service to you as a professor or teacher, and the location is not less than 80 kilometres from the employee’s home; and
- a part-time employee who had other employment or carried on a business, and he or she did the duties at a location no less than 80 kilometres from both the place of the employee’s home and the place of the other employment or business.
Salesperson and clergy
You may pay a reasonable travel allowance for expenses other than for the use of an automobile (such as meals, lodging, per diem allowance) to a salesperson or member of the clergy. You do not have to include the allowance in the employee's income if it was for expenses related to the performance of duties of the office or employment and the employee is either:
- an agent selling property or negotiating contracts for the employer; or
- a member of the clergy.
You have to include reasonable travel allowances in the income of employees, other than a salesperson or member of the clergy, who travel to perform the duties of the office or employment, unless the allowances are received by the employee for travelling away from the municipality and the metropolitan area where the employer's establishment is located and where the employee ordinarily works or reports.
In some situations, you may provide an allowance to your employee for travel (other than an allowance for the use of a motor vehicle) within a municipality or metropolitan area so your employee can complete his or her duties in a more efficient way during a work shift.
This allowance is not a taxable benefit and can be excluded from the employee's income if all of the following conditions are met:
- The employee travels away from the office.
- The allowance is reasonable. We generally consider a value of up to $17 for the meal portion of the travel allowance to be reasonable.
- You are the primary beneficiary of the allowance.
- The allowance is not an additional form of remuneration.
This means that you do not have to include this type of travel allowance if its main reason is so that your employee's duties are completed in a more efficient way during a work shift.
Reasonable travel allowances
Whether an allowance for travel expenses is reasonable is a question of fact. You should compare the reasonable costs for travel expenses that you would expect your employee to incur against the allowance you pay to the employee for the trip.
If the travel allowance is reasonable, you do not have to include it in your employee's income. If it is not reasonable, the allowance has to be included in your employee's income.
For more information, see paragraph 48 in Interpretation Bulletin IT522R, Vehicle, Travel and Sales Expenses of Employees.
Your employee may be able to claim certain employment expenses on his or her income tax and benefit return. For more information, see Employee's allowable employment expenses.
If the allowance is taxable, it is also pensionable and insurable. Deduct CPP contributions, EI premiums, and income tax.
Reporting the benefit
Report the taxable allowance in box 14 "Employment income" and in the "Other information" area under code 040 at the bottom of the T4 slip. For more information, see T4 - Information for employers.
To see how this policy works, see Examples.
Forms and publications
- Interpretation Bulletin IT470R, Employees' Fringe Benefits
- Interpretation Bulletin IT522R, Vehicle, Travel and Sales Expenses of Employees
- ITNEWS-40 Income Tax - Technical News No. 40
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