Automobile Log Usage More Important Than Ever Before

HRinfodesk---Canadian Payroll and Employment Law, April 2004

Last year, the Canada Revenue Agency, CRA (formerly the Canada Customs and Revenue Agency, CCRA) introduced new rules relating to automobile benefits. As a result, many individuals who are provided with a vehicle by their employer may benefit if they travel less than 20,000 kilometers in a year and less than 50% of the usage is business related. As a consequence of this change, the CRA has indicated that they are going to become more stringent in requiring documentation of personal versus business use of automobiles. What is one of the best ways for individuals to do this? The use of an automobile log.

When an employer or a person to whom the employer is related makes an automobile available in a given year to his employee or to a person related to the employee, the latter must include, in calculating his/her income from an office or employment for the year, a reasonable amount representing the value of the stand-by charge for the automobile and an amount in respect of the benefit relating to the automobile’s operating costs paid by the employer. Given that values related to the stand-by charge can be reduced on a proportionate basis determined on a personal versus business use basis, a logbook is an important element in substantiating the ultimate taxable benefit to be assessed.

Although it is the employee's responsibility to maintain accurate records in order to enable the employer to calculate the standby charge and operating cost benefit, employers need to take reasonable steps to ensure that the information provided is accurate and complete. If the employer has doubts about the accuracy and completeness of the information provided, he or she should discuss the matter with the employee. If the standby charge and operating cost benefit are calculated incorrectly, it could result in the employer under-deducting income tax. The under-reporting of automobile benefits could also impact the calculation, deduction and reporting of other figures, including:

* Canada Pension Plan contributions,
* GST/HST remittances, and
* Various provincial and territorial taxes and levies.

This could subject the employer to interest and penalties on these amounts.

A recent court case also emphasized the potential value of a log book. Because the taxpayer could not provide any demonstrable evidence relating to his actual usage of the company owned vehicle, the CRA assessor made an estimate based upon assumptions which resulted in a very unfavorable assessment to the taxpayer. While the taxpayer was ultimately successful in overturning this assessment the judge commented—it is unfortunate that the taxpayer did not keep a log recording his personal use of the truck in the years under appeal, as that would have negated the need for this litigation. That is not necessarily fatal to his position, however, although it does make it more difficult for him to discharge the burden of displacing the Minister's assumptions as to the use of the vehicle, as the Federal Court of Appeal has pointed out more than once. In this case, the taxpayer and the Minister have both made estimates of the proportion of the use of the vehicle that was for the business and that which was personal use by the Appellant. My appreciation of the evidence leads me to believe that the Appellant's evidence, and his estimate, are the more reliable.

To help employers and employees, the CICA publishes a practical, generic automobile log which is ideal to provide to clients. It allows clients to easily document usage as well as keep track of various operating costs in a single location. Starting at only $105.00 for 50 books, the Personal Automobile Log is an easy way to help your clients minimize their tax liability and avoid unnecessary assessments. Note: the Logs are not imprinted with any date so you can use them over any time period. To order your copies, go to the Knotia - Personal Auto Log website.

For more information on the case, go to the Tax Court of Canada website at Grinblats v. The Queen.

By Yosie Saint-Cyr, Editor at HRinfodesk

Published on HRinfodesk---Canadian Payroll and Employment Law

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