Auto standby charge relief — Finance allows temporary rearview eligibility

Finance allows temporary rearview eligibility

Employees can use 2019 kilometres to determine eligibility for the reduced standby charge


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Employees will be able to use their 2019 automobile usage to determine whether their employer-provided automobile is eligible for the reduced standby charge in 2020 and 2021. Employees will also be able to use 2019 automobile usage to determine if they are eligible to calculate their operating cost benefit as 50% of the standby charge in these years. Finance announced this relief in response to business changes resulting from the pandemic, including a decrease in automobile usage for business purposes.

Finance released draft legislation to enact this change on December 21, 2020. These measures would be effective for the 2020 and 2021 taxation years.


When an employee uses an employer-provided automobile for personal use, the employee must generally include a standby charge and operating expense benefit in income.

The standby charge can be reduced when the automobile is primarily used for business purposes. Employees are eligible for the reduced standby charge where they use the vehicle for business purposes more than 50% of the time, and the employee does not exceed 1,667 km per month (20,004 km per year) for personal use.

If an employee's use of the automobile is primarily for business purposes, the employee may also elect to calculate their operating expense benefit as an amount equal to 50% of the standby charge, rather than using the per-kilometre prescribed flat rate.

Using 2019 automobile usage for 2020 and 2021

Finance's draft legislation proposes to allow eligible employees with an employer-provided automobile to use their 2019 automobile usage (rather than their 2020 usage) to determine whether they are eligible for the reduced standby charge and the optional operating expense benefit calculation in 2020 and 2021. Only employees with an automobile provided by the same employer as in 2019 would be eligible to use this option. Although the 2019 kilometres may be used to determine whether the employee's use of the automobile is primarily for business purposes, the actual 2020 (or 2021 as applicable) personal-use kilometres will still be used for the actual calculation of the reduced standby charge.

Finance says employees eligible for the optional calculation of the operating expense benefit, based on their 2019 automobile usage, will not have to notify their employer in order to use this method. Instead, the operating expense benefit would be deemed to be the lesser of the operating expense benefit using the per-kilometre prescribed rate or the optional calculation.

Employees unable to meet the business use requirement must calculate the operating expense benefit according to the per-kilometre prescribed rate.

Finance notes that there are no changes to an employer's GST/HST obligations, which continue to be based on the amount of automobile expense benefits determined under the tax rules.

For more information, contact your KPMG advisor.

Information is current to December 22, 2020. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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