Company Car or Car Allowance?

[bass8lbs]

What is the best way to go?
I kinda like the car allowance because I can purchase and choose my own vehicle, maintain private insurance and have the extra cash allowance benefits. What does a car allowance generally cover and how should I calculate it? Gas, Maintenance and partial Insurance costs? What are the tax liabilities? Is a company car a better deal?
What is the best means of comparing and choosing between the two as a new employee of a large corproation? My job will involve national sales with lots of travelling and driving; I will be making abit over $100K with salary and bonus(s), will have an expense account and the standard benefits such as medical, etc.
How should I choose or which plan would I be better off with?

 

[assmang]

I have found that a car allowance is the best option. Taxed at lower rate, select own car etc.

A company car is a taxable benefit and in that salary range will impact your net income.

Congrats.

 

[danmand]

What is the best way to go?
I kinda like the car allowance because I can purchase and choose my own vehicle, maintain private insurance and have the extra cash allowance benefits. What does a car allowance generally cover and how should I calculate it? Gas, Maintenance and partial Insurance costs? What are the tax liabilities? Is a company car a better deal?
What is the best means of comparing and choosing between the two as a new employee of a large corproation? My job will involve national sales with lots of travelling and driving; I will be making abit over $100K with salary and bonus(s), will have an expense account and the standard benefits such as medical, etc.
How should I choose or which plan would I be better off with?

Maybe none of the above. You may very well be better off expensing $0.52 per km.(non-taxable)

 

[SaturnFan]

I've never been in this situation, but if a lot of travelling is involved with the job, wouldn't one be better off putting the wear and tear on a company vehicle?

If you put a lot of kilometers on your own personal vehicle on company business, then you would be replacing it sooner.

Just my $0.02.

 

[Keebler Elf]

Maybe none of the above. You may very well be better off expensing $0.52 per km.(non-taxable)

If you're driving that much, the company probably won't agree to this. Or will put a cap on it.

 

[guelph]

Maybe none of the above. You may very well be better off expensing $0.52 per km.(non-taxable)

You are probably correct. Car allowance is taxable unless you submit trip reports that cover the milage. Company car could be expensive depending on you personal milage if less than 90% bussiness.

Below is link to CRA Auto benefit calculator (hope it works)

http://www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/bc-eng.html

Link to CRA website re allowances

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/llwnc/menu-eng.html

 

[Mister K]

It really comes down to whether you will be using the company vehicle for personal use. If so then you will be subject to the taxable benefit section of the tax act. Not necessarily a good thing, I know a lot of people who got a real surprise when their T4's arrived.

Best to consult a tax accountant for the best answer, and then follow it up with CRA.

 

[GPIDEAL]

CRA has a two-tiered non-taxable mileage allowance rate (higher up to 5,000 km; lower after 5,000 km - off the top of my head, I can't recall the rates, 50 odd cents, then 40 odd cents per KM). If your allowance isn't expressed in terms of their non-taxable mileage allowances, then it should be taxable but you would deduct the auto expenses of your business mileage as permitted by a T2200 form signed by the company executive.

 

[Aardvark154]

It reallly may be worth the time and money to speak with a Tax Lawyer.

 

[danmand]

It reallly may be worth the time and money to speak with a Tax Lawyer.

Avoid lawyers. Talk to your accountant. This is simple stuff.,

 

[Aardvark154]

Avoid lawyers. Talk to your accountant. This is simple stuff.,

Ok, I'll be generous talk to an accountant - but talk to someone who knows what they are talking about and can be held accountable for the advice they give.

 

[SKINHUNTER]

AHH...how much is the car allowance?

 

[Aardvark154]

I'm not a tax lawyer by any means, but I'm sure this will be useful to you.

Stealing the bread from the children's mouths

Without looking it up, you've sold me.

 

[fedor77]

i get 40 cents per km.....is this reasonable?

 

[Fritz the Cat]

You should first thank ME. It's because of MY tax dollars (and everybody else) that your large corporation can give you this benefit. Shhhh!

 

[RecycledTeenager]

i get 40 cents per km.....is this reasonable?

50 cents are most common and what I am getting, 40 cents are low.

 

[bass8lbs]

Well, this is my research and understanding so far from CCRA. A car allowance is a combination of flat-rate and reasonable per kilometre allowance.
The flat rate is based on a max lease amount and is $800/mth plus HST, is taxable income but also can deduct related expenses, in-side a district.
The re-imbursement for kilometers is .52 for the first 5K and .42 thereafter, out-side the district (not covering same use).

So it is $800 per month plus kilometers! I can use that to finance a purchase of vehicle, my choice, have control and ownership... hmmm..that's a hell of a deal! Assuming I can purchase instead of lease, or have a good buy-out?

My taxable benefit is $800 x 12 = $9,600 less insurance & maintenance, say 50%, thats $4,800 at 50% tax is say $2,500/yr. tax benefit and the company finance my vehicle and my kilometers charged are tax free. hmmmmm....... Sounds pretty good to me, what am I missing here?

 

[danmand]

50 cents are most common and what I am getting, 40 cents are low.

CRA will allow 52 Cents. There is a way to add HST to the 52 cents, but I am not sure how it is done.

 

[Aardvark154]

Sounds pretty good to me, what am I missing here?

Of course you are putting a lot of miles on the vehicle so it is going to drop dead sooner.

 

[GPIDEAL]

i get 40 cents per km.....is this reasonable?

It's a reasonable non-taxable allowance, but you can get more without paying taxes on it. See the rates quoted above for CRA-approved mileage allowances. Mind you, you should figure out the total operating costs of your car including depreciation and divide by your total mileage for an actual rate and compare it to the non-taxable allowance rates approved by CRA.