Category: Domestic Tax

CRA updated several administrative policies in respect of employment benefits, effective January 1, 2022. Two of the key changes relate to employee gifts and parking. These updates were released in late 2022.

Gifts, awards, and long-service awards

Under CRA’s existing gifts and awards administrative policy, the first $500 of annual gifts and awards provided to arm’s length employees is non-taxable. This policy does not apply to cash or near-cash gifts. Historically, CRA had considered all gift cards to be cash or near-cash gifts and, therefore, a taxable benefit. However, CRA will now accept certain gift cards to be non-cash and eligible to be a non-taxable benefit provided all of the following requirements are met:

• the gift card comes with money already on it which the terms clearly state cannot be converted to cash;
• the use of the gift card is limited to purchases from a single retailer or a group of retailers identified on the card;
• the employer maintains a log to record all of the following details:
• name of the employee;
• date the gift card was provided;
• reason for providing the gift card to the employee (e.g. gift, award, social event);
• type and amount of gift card; and
• name of retailer(s) at which the gift card can be used.

Parking

Generally, employer-provided parking is a taxable benefit to employees unless a particular exception applies, such as where there is scramble parking. As a COVID-19 relieving measure, CRA stated that where there was a closure of the place of employment (including situations where employees were given the option to work from home full-time) due to COVID-19 between March 15, 2020, and December 31, 2022, no taxable benefit arose in respect of employer-provided parking in this period. When the employee returns to their regular place of employment to perform their duties, including returning on a part-time basis, the policy no longer applies, meaning that the parking benefit becomes taxable (unless another exception applies).

CRA also discussed many other policies related to parking benefits, such as the exception for scramble parking such that no taxable benefit arises. This policy requires that parking spaces are not assigned and are available to all employees who want to park. Not more than two parking spaces can be available for every three employees who want to park. CRA indicated that this ratio would be based on the average number of parking spaces and employees, calculated at least annually, with a recalculation if there is a significant change.

ACTION ITEM: Consider whether these updates will affect the taxability of current benefits offered.

The Canada dental benefit, announced in September 2022, provides up-front tax-free payments to cover dental expenses for children under age 12 without dental coverage. The program began December 1, 2022, with expenses retroactive to October 1, 2022, being covered.

The program is available for two periods: December 1, 2022, to June 30, 2023, and July 1, 2023, to June 30, 2024. While the program expires in mid-2024, the government has stated that it is committed to fully implementing a dental program for all households with income under $90,000 by 2025.

Services that dentists, denturists, or dental hygienists are lawfully able to provide, including oral surgery and diagnostic, preventative, endodontic, periodontal, prosthodontic, and orthodontic services, are eligible for the benefit.

Amounts

The amount of payments that are provided annually (per period) per child under age 12 are based on adjusted family net income (AFNI) as follows:

• $650/child if AFNI is under $70,000;
• $390/child if AFNI is between $70,000 and $79,999; and
• $260/child if AFNI is between $80,000 and $89,999.

AFNI for the benefit’s purpose is the same as for the Canada child benefit, with the annual income period ending on December 31, 2021, for the first period and December 31, 2022, for the second period.

Shared-custody parents at the beginning of the relevant period are each eligible for 50% of the benefit, based on whether they incur or will incur eligible expenses in the period and their respective AFNI.

The benefit does not reduce other federal income-tested benefits (for example, the Canada workers benefit, the Canada child benefit, and the GST credit).

Eligibility

To qualify, parents need to attest that the following conditions are met:

• their child does not have access to private dental care coverage (for example, through a parent’s employer or coverage that is paid for personally); and
• the child has received, or is intended to receive, dental care services during the relevant period.

Parents also need to provide documentation to verify that out-of-pocket expenses occurred (e.g. show receipts) if required by CRA.

To qualify, the child must be under 12 on December 1, 2022, for the first period and under 12 on July 1, 2023, for the second period.

Application

The application portal for the benefit is available online through CRA’s My Account. Those unable to apply online can call 1-800-715-8836 to complete their application with an agent. In addition to an individual’s standard identifying information and the above-noted attestation, parents need to provide CRA with the name, address, and telephone number of their and their spouse or common-law partner’s employer. They also need to provide information about the dental service provider from which they received or intend to receive services for their child.

ACTION ITEM: Eligible individuals must apply for this benefit on their own as accountants and representatives cannot apply on the client’s behalf.