Deciding whether employee fringe benefits are taxable or non-taxable benefits can be a confusing task, especially with the plethora of benefits available and the numerous exceptions that exist.

Non-taxable Benefits

The following are some of more popular fringe benefits that are generally not taxable:

• Group medical and dental plans.
• Up to two gifts per year if the aggregate cost is less than $500, and up to two awards per year if the aggregate cost is less than $500. Additional gifts or awards, or those exceeding $500, are taxable benefits.
• A party for all employees, to the extent the cost does not exceed $100 per person. Ancillary costs, such as transportation home, increases that amount.
• Discounts on merchandise available to employees, as long as the discount does not result in the sale price being below cost and the discount is available to all employees. If the goods are old or soiled, the purchase price can be less than cost without any taxable benefit.
• Commissions received by a sales employee on merchandise acquired for his/her own personal use.
• Employment commissions received by a life insurance salesperson on a policy he/she owns and is obligated to pay the premiums.
• Uniforms of a distinctive nature, which are required to be worn as a condition of employment.
• Safety clothing, such as safety footwear, designed for protection from the hazards of the employment.
• Cleaning or dry cleaning of uniforms or special clothing, whether paid directly by the employer or indirectly by reimbursement to the employee.
• Transportation from a designated pick-up point to the place of employment at which, for security or other reasons, public and private vehicles are not welcome or not practical.
• Recreational facilities provided for all staff will not result in a taxable benefit to the employee regardless of whether the employee pays a nominal fee for the use of the facilities. Recreational facilities include exercise rooms, gymnasiums, tennis courts, swimming pools, and golf facilities.
• Reimbursements by an employer for expenses incurred to move the employee and his/her family, along with household effects, to a new work location. Also no taxable benefit arises where the employer pays the cost of moving a new employee to a new work location. Similarly, upon termination of employment at a remote location, the cost of moving the employee is not a taxable benefit.
• Employees of transportation companies, such as bus lines, airlines and trains, often use their employer for transportation. Those that are employed by bus and rail companies will not have a taxable benefit for any free or low-cost passes used. No taxable benefit will occur for free or low-cost passes used by retired transportation employees, including employees of airlines.
• A taxable benefit will only occur if an airline employee travels on a space-confirmed basis and is paying less than 50 % of the economy fare on the day of travel. Otherwise, no taxable benefit will arise.
• Professional membership fees are not a taxable benefit as long as the benefit of the membership accrues to the employer. For example, a lawyer's professional membership fees, which are paid by his/her employer law firm, would not be a taxable benefit.
• Health services provided to an employee for physical or mental health are not taxable benefits.
• Retirement or re-employment counselling are not taxable benefits.

Introducing New Benefits

As in many areas of tax planning, whether or not an employee benefit is taxable is a grey area. Management contemplating the implementation of fringe benefits should consult with their chartered accountant to not only ensure that employees are aware of the tax consequences of benefits provided, but also to ensure that those benefits are deductible to the business.