Ask the ExpertCategory: QuestionsTravel Allowance to Employee is it GST able Taxable Benefits ?
hri_Admin Staff asked 1 year ago

Hi There, 
We are in the process of designing the benefit package and would like to include the Travel allowance for people residing in prescribe zone A & B so that it could get captured in box 32 on T4 slips. 
and  employee can claim this items as lower of 3 for deduction in their personal return taxable income. 
We have referred various resources including employer’s guide taxable benefit and allowance and the benefit table. along with Section 6(1)(b) of Income Tax Act & not sure the treatment of Travel
allowance related to the GST aspects . 
Benefit guide Line Items says Travel Assistance in prescribe zone In cash where company i.e. employer is deemed to have collected the GST and accordingly Co. has to remit the same. 
which indicates that this GST Element is potential cost to the company in providing this allowance to employee. 
Further more benefit heading says GST is not applicable on Cash allowance….. So my question here is whether can company treat  this lum sum allowance given with bi weekly salary paycheck as cash allowance in the form of travel allowance. 
Concern here is the the scope of Deemed GST on this taxable benefit. 
and in case if company can’t avoid this GST cost then Is there any way to claim ITC or ITR on this deemed collected GST to ensure that whatever company remits can claim as input tax credit ? 
 
Thanks 
 
 
 
 
 
 
 
 
 
 

2 Answers
Glenn Demby Staff answered 1 year ago

I apologize for keeping you waiting, but I had to enlist a payroll expert on this one. And here’s his reply. Great questions, BTW; try to be a bit faster the next time. . .
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To answer your specific questions.

  1. My suggestion is that there be a flat dollar amount, payable at the start of every month, as a retainer. For this, I would promise to reply to questions asked within 12 hours of receiving them, barring unforeseen circumstances. Since the volume will vary from time to time, my suggestion is $200/month Canadian, plus GST. If there was some large, significant increase in the volume of questions, that might indicate this dollar amount would have to be reviewed.
  2. There seems to be some confusion around the status of a travel allowance that would be reportable in T4 box 14 and code 32. I assume by “allowance”, they mean “non-accountable allowance”, in other words a pre-determined cash payment that does not directly reflect the actual travel expenses incurred. If this assumption holds, the allowance is a cash payment, an earning that falls into the definition of salary and wages. There is no GST on salary and wages paid to employees. Questions about GST, including any possible employer remittance or Input Tax Credits do not apply. Page 38 of T4130-20 (right hand column) says no GST is deemed to have been collected on the payment of allowances. At the same time, page 41 of the same guide says you can’t claim an ITC if the benefit provided was exclusively for the employee’s personal use.

 

Chets Parmar replied 1 year ago

Thank you for your response.

I am expecting that in normal sense it would be a non accountable allowance but specific for travel in prescribe Zone then only it could be captured in box 32 so that employee can take benefit of this. Further specific entry in Benefit table Says one has to include the GST/HST in Travel Assistance in a prescribe zone- in case (Specifically for box 32). do you think still that it would be considered as cash allowance and company can issue T4 with box 32 without any deemed GST applicability for this kind of cash allowance.

On cash allowance part… what i review it appeared to me that cash allowance works like petty cash to employee which means employee can spend on behalf of company without justifying or supporting the bill. so this petty cash concept differs as far as reimbursement is concerned.

Glenn Demby Staff answered 1 year ago

Yes, no GST on travel allowances. There would only be GST if the employer purchased air line tickets, for example, and provided these to the employee. But that would not be an allowance.

Chets Parmar replied 1 year ago

Why would benefit guide code specific line entry for travel assistance in cash and for box 32 to collect GST. There is another entry in benefit guide refer to travel assistance in Kind that too is covered for GST.

Further can employee claim that allowance on Box 32 for prescribe zone travel & take benefit of this on their personal income tax return. Don’t you think it could create an issue for company to give suck kind of allowance just to take advantage to reduce income tax without any cost to anybody.

Though benefit guide headings says no GST is applicable no the cash allowance but on our research it appears that those cash allowance is kind of accountable expenses in nature i mean for the performance of duty.