There’s no such factor as free parking.
Take Toronto-based Catholic highschool and elementary academics, for instance, who this week realized that they are going to quickly need to pay for their very own parking in school heaps. Full-time academics and directors might be charged $10 per day to park their autos on faculty property because of new charges authorised by board trustees at a particular budgetary assembly.
However, even in the event you’re among the many fortunate employees who nonetheless get free parking at your home of employment, it’s typically not really free because the taxman typically considers free parking to be a taxable employment profit.
Through the years, there have been quite a lot of tax circumstances through which taxpayers have challenged the taxability of employer-provided parking, lots of that are based mostly on the worker arguing that their free parking was primarily of profit to their employer and thus shouldn’t be taxable. The latest resolution, out earlier this week from the Federal Court docket of Attraction, concerned a Calgary-based flight attendant of Jazz Aviation LP.
The taxpayer had been a flight attendant with Jazz for greater than 25 years and lived in a residential group in northwest Calgary. It took him about 25 minutes to drive from his house to the Calgary Worldwide Airport, which is situated within the northeast quadrant of town. Whereas on the airport, he made use of the free parking move that Jazz supplied to him, which allowed its workers to park on the “Inexperienced Lot” on the airport. That lot, which had over 2,500 areas, by no means crammed utterly and was accessible 24 hours a day, seven days per week. Anybody who labored on the airport might get hold of a parking move, no matter whether or not an employer paid for it.
The CRA reassessed the taxpayer’s 2011 taxation 12 months to incorporate the honest market worth of the annual worker parking move — $504 — in his revenue. The taxpayer objected and the dispute went to the Tax Court docket again in 2017. The CRA argued that the taxpayer’s revenue should embrace the worth of advantages of “any variety no matter” acquired or loved “in respect of, in the middle of, or by advantage of his employment.” The decrease court docket choose agreed and located the worth of the parking move to be a taxable profit. The taxpayer then appealed to the Federal Court docket of Attraction.
The taxpayer’s principal argument upon attraction was that, based mostly on prior jurisprudence, the place one thing is supplied to an worker primarily for the employer’s profit, it isn’t a “profit” acquired or loved by the worker throughout the that means of the Tax Act. The taxpayer and the CRA, nonetheless, disagree on who was the “major beneficiary” of the parking move, and on how that needs to be decided.
The taxpayer argued that there have been quite a few elements that show the parking move primarily benefitted his employer. Firstly, he pointed to the airport’s distant location vis-a-vis his house and his uncommon hours of employment. For instance, Jazz required him to report for work outdoors of “extraordinary” working hours, beginning as early as 5:00 a.m. and ending as late as 1:00 a.m. Throughout these hours, public transit was not out there. The taxpayer was additionally required to work necessary additional time with out advance discover, to report back to work on brief discover, and to stick to modified shift schedules. The taxpayer argued that these necessities have been “specific to work within the airline trade” and testified that he and different flight attendants have been topic to a “three strikes” coverage, by which they may doubtlessly be terminated in the event that they have been late to work three or extra occasions.
Secondly, the taxpayer cited his employer’s said perception that offering a parking move to flight attendants “enhanced their reliability and suppleness.” He claimed that Jazz supplied its flight attendants with parking passes as a result of it “(minimized) the danger to Jazz … of struggling losses ensuing from late or absent workers.”
The proof, nonetheless, confirmed that Jazz paid for worker parking passes as required by its collective settlement with the Canadian Flight Attendant Union, and it had achieved so since 1993. Jazz didn’t require its flight attendants to personal a automotive or to commute to work by automotive. Slightly, Jazz “(left) it as much as flight attendants to resolve how they (have been) going to be punctual.” As well as, the proof didn’t show that flight attendants who commuted to work by automotive and parked on the airport have been extra dependable than those that used different technique of transportation. Jazz “acquired the identical stage of service from its flight attendants, irrespective of how they selected to commute to work.”
The CRA maintained the taxpayer’s prices of commuting, together with these associated to parking, have been private, and the taxpayer benefitted when his employer “relieved him of the price of parking.” Certainly, when the taxpayer was requested throughout cross-examination whether or not he would have paid for parking anyway if Jazz didn’t present him with a free parking move, he responded, considerably elusively, that he would “discover all choices out there to (him).”
The Federal Court docket of Attraction agreed with the CRA that parking, like all prices of commuting to work, is ordinarily a private expense. Because the choose wrote, “it stays private even when an worker should, as a sensible matter, pay for parking because of the placement of his or her work or the impracticability of utilizing public transit. Subsequently, save in distinctive circumstances … parking paid for by an employer represents an financial profit to the worker.”
Within the court docket’s view, the basic problem to be determined was whether or not an employer has conferred one thing of financial worth on an worker, however that the receipt of such worth “may be mutual, and infrequently is.” Whereas the court docket agreed with the taxpayer that Jazz certainly had a enterprise function in paying for parking, specifically incentivizing flight attendants to make use of a dependable methodology of transport to get to the airport, and that Jazz did profit, that doesn’t negate the truth that the taxpayer acquired some financial worth from the availability of the free parking move. In different phrases, the taxpayer’s parking prices remained private, no matter whether or not his employer benefitted in subsidizing them and subsequently the worth of the free parking should be included within the flight attendant’s revenue as a taxable employment profit.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Property Planning with CIBC Monetary Planning & Recommendation Group in Toronto.