Acco340Lecture 2-3 - Employment Income

Return keys when auto not in use for significant

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- Return keys   - when auto not in use for significant periods.(ie, lower periods of availability= lower taxable benefits - Leasing vs buying  – usually lower taxable benefits when auto is leased (eg 2/3 of lease lower than 2%per mth) . - Minimize standby charge  – longer lease terms, larger deposits on leases, higher residual values on leases, all  result in lower monthly payments and hence taxable benefits. - Autos over $30,000   for 2010 –   no economic reason to provide autos over $30,000, as employee taxable  benefit is based on actual cost, whereas the employer tax deduction is limited to a maximum of $30,000. - Alternative   – employer compensates employee for using his own auto for business purposes is best when  business employment usage is less than 50%.          Allowances
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- An   allowance   is an amount received by employees from an employer,that is   other than   salaries, wages or  benefits. (e.g. a kilometre allowance for salesperson using his private auto). Allowances may or may not be  taxable, depending on the circumstances. -    Reimbursement received   for expenses (usually supported by receipts) incurred by employees on behalf of the  employer’s business, (eg business trip travel costs, or purchase of office stationary, etc.)  is not taxable because  employee only becomes ”whole” with the reimbursement payment. - ITA 6(1)(b ) deems that an  allowance for  personal or living expenses  is taxable employment income  (eg,  rent, cloths, shoes, groceries, vacation holidays, etc.) NOTE: An allowance is taxable if it is used to purchase a personal item (eg,clothes/shoes) even if that personal item was  used to earn employment income. Furthermore, due to its personal nature (ie, clothes/shoes) this expense cannot be  deductible under ITA 8. Hence, receiving such an allowance is taxable and no deduction is possible for the personal item  that was purchased. - However,  certain items for which an allowance under ITA 6(1)(b) is included as employment income, can also  be deducted against employment income   under certain employment circumstances,   as per   ITA 8.   For  example: ITA 8(1)(f) - salesperson’s expenses ITA 8(1)(h) - travelling expenses other than motor vehicle expenses ITA 8(1)(h.1)   - motor vehicles expenses ITA 8(1)(i) - Professional dues, office rent, etc ITA 8(1)(j) - motor vehicle capital cost - Due to this  circular proces s of an item being both taxable and deductible,  some allowances are  not  taxable : ITA 6(1)(b)(v)     - reasonable allowances * for a travelling salesperson, including motor vehicle ITA 6(1)(b)(vii)    - reasonable allowances
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