How to ensure that the automotive allowance to an employee using their own vehicle is not a taxable benefit?

Automotive Allowance Expenses

An Automotive allowance is not a taxable benefit if based on a reasonable per kilometer rate per the Canada Revenue Agency.

CRA considers an allowance to be reasonable if all the following conditions apply:

  • The allowance is based only on the number of business kilometers driven in a year.
  • The rate-per-kilometer is reasonable.
  • The employer did not reimburse the employee for expenses related to the same use of the vehicle.

Examples of an automotive allowance that is a taxable benefit are when automotive expenses are claimed for reimbursement but are not related to the number of kilometers driven.

The CRA reasonable allowance rates for 2019 are 58 cents per kilometer for the first 5,000 kilometre driven and 52 cents driven after that.