How is a company car taxed as a benefit in Ontario?

If your employer provides you with a vehicle that you can use for personal purposes, the personal-use portion is a taxable employment benefit that must be included in your income. This applies equally to Ontario residents, as the rules are federal. The benefit is calculated using two components: the standby charge (for having the car available) and the operating cost benefit (for employer-paid operating costs like fuel or insurance attributable to personal use).

The standby charge is a percentage of the original cost of the vehicle (or the lease cost), calculated based on the number of months the vehicle was available to you. If your personal use is less than 50% of total driving, a reduced standby charge may apply. The operating benefit is calculated using a fixed per-kilometre rate set by the CRA each year for personal driving.

Your employer is required to calculate the total automobile benefit, include it in Box 14 of your T4, and withhold income tax accordingly. You can reduce the operating cost benefit by reimbursing your employer for personal-use kilometres at a rate set by the CRA. Good record-keeping of business versus personal kilometres throughout the year is important to support a reduced standby charge or operating benefit calculation. If you believe your employer's benefit calculation is incorrect, a tax professional can review it.