Canada: Employer-provided automobiles eligible for reduced personal use “standby charge”

Canada: Employer-provided automobiles

Employees would be able to use their 2019 automobile usage to determine whether their employer-provided automobile is eligible for the reduced “standby charge” for personal use in 2020 and 2021.


Employees would 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 draft legislation, in response to business changes resulting from the coronavirus (COVID-19) pandemic, including a decrease in automobile usage for business purposes.


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 when 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 would still be used for the actual calculation of the reduced standby charge.

Finance reported that employees eligible for the optional calculation of the operating expense benefit, based on their 2019 automobile usage, would 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 would have to calculate the operating expense benefit according to the per-kilometre prescribed rate.

There are no changes to an employer's goods and services tax / harmonized sales tax (GST/HST) obligations, which continue to be based on the amount of automobile expense benefits determined under the tax rules.

Read a December 2020 report prepared by the KPMG member firm in Canada

© 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us