The new Taxable Benefits Navigator determines whether a benefit received in connection with an employee’s office or employment is a taxable benefit that must be included in the employee’s income pursuant to section 6 of the Income Tax Act. While such benefits are generally taxable under section 6, the CRA’s administrative policy and numerous sections of the Act provide exemptions for certain types of benefits.
The Taxable Benefits Navigator compiles and synthesizes the exemption rules spread throughout the Income Tax Act and the CRA’s administrative documents (most notably Guide T4130). Its dynamic questions allow the user to efficiently and accurately navigate this complex area. Let’s delve into Tax Foresight’s treatment of a long-service award given to an employee.
An example: Considerations regarding long-service awards
Upon selecting ‘Gratuities, gifts, awards, points, or bonuses’ from the initial menu of common benefit types, the Navigator offers several user-responsive prompts to determine whether the benefit is excluded from the CRA’s administrative policy (and is therefore taxable under section 6). For example, cash or near-cash awards are always taxable under section 6 according to the policy, so the long-service award must not be cash or near-cash to qualify for an exemption. Further, the Navigator determines whether rules under different sections of the policy might also apply in the user’s case. For example, if the long-service award is a ticket for an event, the rules for tickets will apply.
Once the user has verified that no special considerations apply, the Navigator provides several questions that track the rules specific to long-service awards. A long-service award must be given in recognition of five or more years of service with the employer. In addition, it must have been at least five years since the employee last received a long-service award. If the award satisfies both of these conditions, the CRA’s administrative policy makes an exemption for the long-service award for the value up to and including $500. If the fair market value of the award is above $500, there is a taxable benefit to the employee, but only for the amount above $500. Otherwise, there is no taxable benefit to the employee in respect of the long-service award.
Navigator Scope and Features
- The Navigator spans over 25 categories of benefit, including many subcategories, resulting in over 250 possible questions representing over 250 rules from the Income Tax Act and the CRA’s administrative policy.
- The Navigator delivers a binary result of Taxable/Not taxable, along with an explanation and links to relevant resources.
- An average navigation will ask the user 3-6 questions tailored to the rules governing the type of benefit the user identifies in the original selection.
- The Navigator includes rules for the following common benefits, among many others:
- Cash bonuses
- Motor vehicles
- Accommodations and housing benefits
- Meals and related allowances
- Parking spots, permits, or passes
- Travel benefits
- Our professional team keeps the Taxable Benefits Navigator up to date with the latest legislative amendments and CRA policy updates (including the hotly debated discounts policy).
Areas of Law
Tax Foresight’s products cover various topics in tax law, including income vs. capital, sources of income, inclusions, deductions, indirect tax, jurisdiction, penalties, and elections, with new areas being added every month. To keep track of our current offerings, visit our website: www.bluejlegal.com.
To learn more about our products, tune into our monthly webinar series, Predicting judicial decision-making with machine learning, where Benjamin Alarie, CEO and co-founder of Blue J Legal, will speak about the company’s work in creating Tax Foresight. Each webinar features a demonstration of what Tax Foresight is teaching tax practitioners about the hidden dimensions of judicial decision-making, and will analyze a recently decided case using one of Tax Foresight’s Classifiers.
The next webinar features our Residency Classifier and will take place on Tuesday, October 24th at 1:00pm EDT. You can sign up for our upcoming webinars or watch those you missed here.