The federal government has announced changes to employee taxable benefits policies in an effort to reduce the administrative burden for employers and ensure more fairness in tax administration.

One change reduces the number of overtime hours an employee must work to receive a tax-free meal allowance, which will give businesses more flexibility in the tax treatment of these allowances, according to the government.

Another change clarifies the rules under the Canada Revenue Agency’s gift and award policy, which allows employers to give employees non-cash gifts and awards up to $500 per year, tax-free. The new rules state that employees are also eligible to receive a separate non-cash long service or anniversary award of up to $500 tax-free, under certain circumstances.

The new rule also states that items of immaterial or nominal value, such as coffee, T-shirts, mugs or plaques, will not be considered a taxable benefit to employees.

The government also changed its policies with respect to loyalty programs. The rules previously required employees to calculate and include in their income the fair market value of any reward points accumulated by charging employer-reimbursed expenses to personal credit cards. Under the change, the CRA will no longer require these employment benefits to be included in an employee’s income.

Lastly, under certain circumstances, businesses will no longer have to report allowances paid to their employees for travel within a municipality.

The changes flow from a commitment in the 2007 federal budget to reduce the administrative burden related to tax compliance, according to Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food), who announced the changes in mid-June. The CRA initiated a review of taxable benefits to employees in 2007, and worked with other government and external stakeholders to develop the changes.

“The Government of Canada is determined to provide equitable service to Canadians every time they deal with the CRA,” said Blackburn. “These administrative changes by the CRA show the will of the Government to offer a tax system that is fair and competitive and in line with today’s economic reality.”

The Canadian Payroll Association praised the changes.

“These changes that reduce the administrative burden for gifts and awards, overtime meal allowances and four other benefits increase the efficiency and effectiveness of payroll-related legislation for all stakeholders: employers, government, employees and the general public,” said Patrick Culhane, president and CEO of the CPA, in a statement.

“Effective and efficient payroll administration is mission-critical for all organizations, given the: responsibilities of employers, needs of employees, magnitude of remittance payments and breadth of legislative compliance requirements,” he added.

According to the CRA, Canada’s 1.5 million employers annually pay $730 billion in wages and taxable benefits, $200 billion in remittances to the Canada Revenue Agency, $30 billion in remittances to the Ministère du Revenu du Quebec, and $80 billion in health and retirement benefits.

“The CPA thanks the Canada Revenue Agency for working cooperatively with Canadian employers and their payroll professionals to effect changes regarding administrative policies for employee taxable benefits,” said Janice MacLellan, CPA chairman.

The CPA said it would work with the CRA on an ongoing basis to communicate the specific impacts of the changes to taxable benefit administration and the implications for payroll.

IE