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Automobile Standby Charge Benefit

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Business   ->   Automobiles, Passenger Vehicles and Motor Vehicles   ->   Automobile Taxable Benefits  -> Standby Charge Benefit

Automobile Standby Charge Benefit

Income Tax Act s. 6(1)(e), s. 6(2)

The standby charge benefit recognizes that the employee is receiving a benefit by having the automobile available to them during the year for their personal use.

The standby charge is calculated based on:

bulletthe original cost of a purchased automobile or the monthly lease cost of a leased automobile (including GST or HST and PST if applicable), and
bulletthe number of months the automobile is available to the employee for personal use (which normally includes driving to and from work), and
bulletthe number of kilometres driven for both personal and business purposes, and
bulletany reimbursement by the employee for the availability of the vehicle.

When the automobile is owned by the employer, the standby charge is:
        2% x cost of automobile x # of months available to the employee in the year

If the automobile is available 12 months of the year, then 24% of the cost of the automobile is included in the employee's income each year.

When the automobile is leased by the employer, the standby charge is:
        2/3 x monthly lease costs (excluding insurance) x # of months available to the employee in the year.

Standby Charge Reduction

For 2003 and later years, the standby charge may be reduced if:

bulletthe kilometres driven for business use are at least 50% (90% prior to 2003) of the total kilometres driven, and
bulletless than 20,004 km per year, or an average of 1,667 km per month (1,000 km per month previously), are driven for personal use.

Example of standby charge calculation for owned vehicle:

Cost of vehicle including taxes

$25,000

# of months available for use

12

Total kilometres driven

35,000

Personal kilometres driven (40% of total)

14,000

Standby charge = $25,000 x 2% x 12 months x 14,000/20,004 = $4,199

If the personal use had been 50% or more, then the benefit would be:
$25,000 x 2% x 12 months = $6,000

The above example assumes no reimbursement has been made by the employee to the employer.  When business use is 50% or greater, the operating cost benefit is also reduced.

The above rates remain unchanged for 2017.

Other Resources:

All topics related to vehicles and business

Automobile Sales People

Tax Tip:  If your personal use is less than 50%, make sure your employer is aware that the standby charge benefit should be reduced.

Revised: September 19, 2017

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