Travel Allowance Taxable? Understanding Canada's Stance

In Canada, travel allowances are generally taxable benefits that must be included in an employee's income. However, there are specific conditions under which travel allowances are non-taxable. For instance, if a part-time employee incurs travelling expenses to and from their workplace, and they are dealing at arm's length with their employer, the travel allowance is non-taxable. This applies to part-time teachers, professors, salespeople, and clergy. Additionally, travel allowances for employees travelling away from their workplace municipality or metropolitan area to perform their duties are also non-taxable. Reasonable travel allowances, which are based on expected expenses, are also excluded from an employee's income. During the COVID-19 pandemic, the Canada Revenue Agency (CRA) provided guidance on the taxability of certain benefits, including allowances for commuting costs and home office equipment.

Teachers and professors who work part-time in a designated educational institution in Canada

• The employee works part-time and deals at arm's length with the employer.
• The educational institution is designated and located at least 80 kilometres from the employee's home.
• The allowance is reasonable and covers travel expenses other than the use of an automobile, such as meals and lodging.

The Canada Revenue Agency (CRA) considers an allowance reasonable if it covers the out-of-pocket expenses incurred by the employee while travelling for work. CRA guidelines state that an allowance of up to $23 for the meal portion of the travel allowance is generally considered reasonable.

If the above conditions are not met, the travel allowance may be included in the employee's income and become taxable. It is important to note that the employer is responsible for determining whether the allowance is reasonable and should compare the allowance provided with the expected travel expenses.

Part-time employees who have another job or business, and perform duties at a location at least 80km away from their home and the other workplace

As a part-time employee in Canada, if you have another job or business and perform duties at a location at least 80km away from your home and the other workplace, your employer may give you a reasonable allowance or reimbursement for travelling expenses. This amount does not need to be included in your income, as long as you and your employer are dealing at arm's length.

The CRA defines a reasonable allowance as a value of up to $23 for the meal portion of the travel allowance. This amount is considered reasonable if it covers the out-of-pocket expenses incurred while travelling for work.

In addition, the CRA has provided specific guidelines for part-time employees who are teachers or professors at designated educational institutions and those who are salespeople or members of the clergy.

For teachers and professors, the location of the part-time job must be at least 80km away from their home.

Salespeople and members of the clergy are exempt from including travel allowances in their income if the allowance is for expenses related to the performance of their duties and they are:

• Agents selling property or negotiating contracts for the employer
• Members of the clergy

Salespeople and clergy

• They are an agent selling property or negotiating contracts for the employer
• They are a member of the clergy

The CRA generally considers a value of up to $23 for the meal portion of the travel allowance to be reasonable.

Employees travelling away from the office

Employees who travel away from the office may be reimbursed for their travel expenses, including food, beverage, lodging, and transportation expenses. These reimbursements are non-taxable as long as they are reasonable and the employee was required to pay for their own travel expenses as part of their contract. If the employee does not pay for their own travel expenses, any reimbursements provided by the employer will be included in the employee's income.

If an employee works primarily from home, their trips to the office may be tax-deductible. This was affirmed in a 2020 tax case, where a beauty company employee who commuted from her home office in Pickering to her employer's head office in Oakville was allowed to deduct her vehicle travel expenses.

Teachers and professors who work part-time in designated educational institutions located at least 80 km from their homes can be reimbursed for their travel expenses without these reimbursements being included in their income. The same applies to part-time employees who carry out duties at a location at least 80 km from their home and place of other employment or business.

Salespeople and clergy can also be reimbursed for travel expenses, excluding vehicle expenses, without these reimbursements being included in their income.

In some cases, employers may provide employees with a travel allowance to perform their duties more efficiently during a work shift. This allowance is non-taxable if the employee travels away from the office, the allowance is reasonable, the employer is the primary beneficiary, and the allowance is not an additional form of remuneration. The Canada Revenue Agency (CRA) generally considers a value of up to $23 for the meal portion of the travel allowance to be reasonable.

Employees travelling within a municipality or metropolitan area to perform their duties more efficiently

In Canada, employers may provide employees with a travel allowance or reimbursement for travel expenses incurred while performing their duties. This can include expenses for transportation, meals, and lodging, but usually excludes automobile or motor vehicle expenses. These allowances are generally considered taxable benefits and must be included in the employee's income, unless specific conditions are met.

For employees travelling within a municipality or metropolitan area, there are circumstances where the travel allowance is non-taxable. This exception applies when:

• The employee travels away from the office.
• The allowance is reasonable. The Canada Revenue Agency (CRA) typically considers a value of up to $23 for the meal portion of the travel allowance as reasonable.
• The employer is the primary beneficiary of the allowance.
• The allowance is not an additional form of remuneration.

In such cases, the travel allowance can be excluded from the employee's income, as it is intended to improve the efficiency of the employee's duties during their work shift. However, it is important to note that the determination of whether an allowance for travel expenses is reasonable is based on the specific facts of each situation. Employers should compare the reasonable costs expected for travel expenses with the allowance provided to the employee for the trip.

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