When an employee works overtime and you provide him or her with a meal allowance, do you know under what conditions it is considered a taxable benefit?
Certain conditions apply for the CRA not
to consider the overtime meal allowance to be a taxable benefit. All of the following conditions must apply:
- The allowance, or the cost of the meal, is reasonable. Generally consider a value of up to $17 is reasonable. Higher amounts will be considered reasonable if the relative cost of meals in that location is higher, or under other significant extenuating circumstances.
- The employee works two or more hours of overtime right before or right after his or her scheduled hours of work.
- The overtime is not frequent and is occasional in nature (usually less than three times a week).
If overtime occurs frequently or becomes the norm, CRA considers the overtime meals or allowances to be a taxable benefit (including GST/HST), since they start to take on the characteristics of additional remuneration.
When it is considered to be a taxable benefit, then it is also pensionable, and is subject to CPP and Income Tax deductions. If paid in cash, then it is also subject to EI deductions.
There are some excellent examples on the CRA web site at: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/mls/llwncxmpls-eng.html
(Source – Canada Revenue Agency)
- Bill Smyth CPA, FCGA, FCPA
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