Here are seven things that may form part of your compensation and how they are taxed by the Canada Revenue Agency.
Sean Kilpatrick / THE CANADIAN PRESS
Amounts your employer pays for your life, accident and critical illness insurance coverage are considered taxable benefits by the Canada Revenue Agency.
By now most Canadians should have received their T4 slips (if they get one), which records how much you made and the amount of tax deducted throughout the year.
If you look closely you may find that the amount you paid taxes on is higher than your annual salary. The reason is that many of the benefits and perks you enjoy are also taxable and your employer must report them to the Canada Revenue Agency. These amounts are in addition to base pay, commissions and any bonuses you earned last year.
Here are seven things that may form part of your compensation and how they are taxed by the CRA.
1. Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do not pay tax on the premiums.
If you collect on your short-term or long-term disability insurance you will pay taxes if any part of the premiums were employer-paid.
2. Pensions/group RRSPs: Your company’scontributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $23,820 for 2013) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
3. Service and recognition awards:Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award.
In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less.
4. Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition.
Where the company gives you child a scholarship or bursary, generally neither you nor your son or daughter who gets the scholarship has to pay taxes on the amount.
5. Parking:Employer-provided parking is usually a taxable employee benefit unless you have a disability or the parking spot is provided because you regularly need to drive a car for work.
If you work in a shopping centre or industrial park where parking is free to employees and customers, a taxable benefit will not be added to your remuneration. Similarly, if there are fewer parking spots than the actual number of employees (scramble parking), free parking is not valued or included in taxable income.
6. Mobile phone:Charges paid by the company for the business use of your cellphone are not taxable. If your phone is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
7. Subsidized meals:If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.
More details about the taxation of these and other employee benefits or allowances can be found on the CRA website.