As a part of an employee benefit package, some employers will pay the premiums on Life Insurance, Long term Disability and AD&D (Accidental Death and Dismemberment). Effective January 1, 2013, the premiums for AD&D paid for by the employer became a taxable benefit, and the cost, including any applicable taxes, is to be included in the income of the employee. It is considered a non-cash taxable benefit, and accordingly is subject to Canada Pension Plan calculations and Income Tax.
In general, premiums paid by the employer to group sickness or accident insurance plans, where benefits are paid in a lump-sum, will be a taxable benefit to the employee, to the extent that the contributions are not in respect of a wage loss replacement benefit payable on a periodic basis.
Also, a retroactive change to Education Benefits was made for any benefits received on or after October 31, 2011. Some employers will provide education benefits such as tuition or scholarships or bursaries to persons related to an employee. You no longer need to include the value of the benefit in the employee’s income as long as the employer is dealing with the employee at arm’s length and that the benefit paid is not a replacement for salary, wages or other remuneration.
Benefits and Allowances – for those who are not aware of what benefits or allowances provided to employees are taxable, Canada Revenue Agency provides an extremely useful chart on their website at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/bnchrt-eng.html. The chart indicates whether the item is subject to Canada Pension Plan contributions, Employment insurance, where on the T4 the item is to be reported, and also whether or not you should include GST/HST in the benefit or allowance. In addition it also clearly outlines differences between cash and non cash benefits.
When using the services of a reliable payroll service bureau, reporting should be included in the service.
Bill Smyth CPA, FCGA, FCPA
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