If you have a personal and/or company car that is used for business purposes, you are entitled to gain a car allowance from your employer. If you use your car for work purposes, it is always best to keep a logbook, this logbook should include the date, location you went, and reason you went there. It is also important to keep receipts, for example, gas receipts, in order to receive a compensation for that as well. If your logbook read you went to 1234 Finch Ave W, on February 22nd, for a delivery, and you have a gas receipt for that same time and date, you can be compensated for said gas amount. Some of you must be wondering how you can receive car allowance. There are three different ways you can obtain this allowance.
In this method it doesn’t matter how many kilometers you’ve driven. You would have made an agreement with your employer prior, in which an amount would have been agreed upon. For example, you and your employer could agree to $325.00 per month to cover the cost of your business-related travels.
The name basically explains this type of agreement. You can be paid allowance in accordance to how many kilometers you’ve driven on business related trips in the month. This method can only work if the employee has a logbook to prove how much he’s driven, and the employer provides a reasonable fee per kilometer. According to the Government of Canada website, the automobile allowance rates for the year 2020, is $0.59/KM for the first 5000 KM driven, and any kilometers driven after that will be paid at a rate of $0.53/KM.
This method allows the employer to pay a lower, guaranteed amount, and pay a lower per kilometer amount as well. For example, your employer and you can come to an agreement of $150 per month, up till 6500 kilometers, then $0.45 per kilometer after that. Thus, if you use your car for business purposes, be sure you are getting the allowance you deserve.
Muhammad Nasrullah,CPA, CGA, LPA
Chartered Professional Accountant
Licensed Public Accountant
206A – 2365 Finch Ave. West North York, ON. M9M 2W8
Tel: (1) 416-748-0817 ext 101 Fax:(1) 416-748-6814
www.nasrullahcga.com E-mail: email@example.com