Calculating the Value of the Standby Charge for an Automobile
If you or a person related to you makes an automobile available to an employee or to a person related to an employee, you have to calculate the value of the standby charge related to the personal use of the automobile.
To calculate the value of the standby charge, you can use work chart TP-41.C-V, Calculation of an Automobile Benefit, or the following formula:
A is the lesser of:
- the total number of kilometres travelled by the employee for his or her personal use during the period in which the automobile is made available (the number is deemed to be equal to variable B, unless you require the employee to use the automobile to perform his or her duties, and the employee uses the automobile primarily [more than 50%] for this purpose), and
- the value of variable B.
B is 1,667 multiplied by the total number of days in the year that the automobile is made available to the employee, divided by 30.
C is the cost of the automobile to you (or to a person related to you).
D is the total number of days in the year that the automobile is made available to the employee while it is owned by you (or a person related to you), divided by 30, then rounded off to the nearest whole number. (See the note for variable B.)
E is the leasing expenses payable by you (or a person related to you) during the period in which the automobile is made available to the employee.
Automobile leasing expenses include all of the following amounts that are payable to the lessor for the automobile (including any GST and QST):
- charges related to kilometres travelled;
- maintenance and repair costs;
- terminal charges (amounts charged at the end of the lease), minus terminal credits (amounts credited at the end of the lease).
Leasing expenses do not include any penalty paid on cancelling a lease, unless the penalty is determined solely on the basis of the resale value of the automobile at the time the lease is cancelled or is derived solely from an adjustment in the leasing price.
If there are any terminal charges or terminal credits, the employee can ask to have the value of the taxable benefit resulting from the lease payments adjusted over the term of the lease, provided it is still possible to make the adjustment for the years in question.
If you pay an amount at the beginning of a lease that is not a payment to buy the automobile but a payment that reduces the monthly lease payments, prorate the payment over the term of the lease and add the amount to each monthly lease payment when you calculate the standby charge.
F is the amount included in variable E that corresponds to the cost of insuring against loss of, or damage to, the automobile or liability resulting from the use or operation of the automobile.
In calculating the cost of the automobile, the leasing expenses and the insurance costs, include any tax that is payable by you (or a person related to you), or that would be payable were it not for the exemption granted by reason of your employer status or the particular use of the automobile.
For more information, click Employee Benefits.
Any amounts that the employee (or a person related to the employee) reimburses you (or a person related to you) in the year for the use of the automobile, other than operating costs, must be subtracted from the reasonable amount that is the standby charge. If the amounts paid exceed the reasonable amount, you cannot use the difference to reduce the operating-costs benefit.
You may choose to calculate the standby charge at the rate of 1.5% rather than 2%, provided:
- the employee does not principally sell or lease automobiles;
- the automobile made available to the employee (or to a person related to the employee) is owned by you; and
- you acquire at least one automobile in the year.
In this case, the cost of the automobile corresponds to the greater of the following amounts:
- the average cost of all new automobiles you acquire in the year for sale or lease; and
- the average cost of all automobiles (new and used) you acquire in the year for sale or lease.
- The value of a benefit related to the standby charge must be calculated at 2% rather than the rate of 1.5% if an individual receives the benefit as a shareholder.
- GST and QST must be included in the average cost.
For sample automobile benefit calculations, see guide IN-253-V, Taxable Benefits.
You can use a simplified method to calculate the standby charge if the following conditions are met:
- You own the automobile provided to the employee.
- The employee uses the same automobile throughout the year.
- The employee's principal source of employment is not selling or leasing automobiles.
- The employee uses the automobile in the performance of his or her duties no more than 50% of the time.
- The employee's personal use of the automobile is 1,667 kilometres or more per 30-day period or a total of 20,004 kilometres in the year.
Under the simplified method, the value of the standby charge is 24% of the cost of the automobile you provide to the employee (including taxes).