2019-0834191E5 Travel Allowances

Principal Issues: Whether payments provided to, or made on behalf of, an elected member of a provincial legislative assembly for housing and incidental expenses are required to be included in income?

Position: Likely no. Where it is established that the constituency office of an elected member of a provincial legislative assembly is a regular place of employment, that member will likely be considered to be travelling to perform duties related to the legislative assembly at another location.

Reasons: An employer’s direct payment of, or a reasonable allowance or reimbursement provided to an employee for travel expenses is not included in income under subsection 6(1) of the Income Tax Act in such circumstances.

Author: Baltkois, Thomas
Section: 6(1)(a); 6(1)(b)

XXXXXXXXXX                                                                2019-083419
                                                                                        T. Baltkois

March 16, 2022

Dear XXXXXXXXXX:

Re: Travelling to perform the duties of employment

We are writing in response to your correspondence of December 2, 2019, regarding the tax treatment of certain payments provided to an elected member (Member) of the XXXXXXXXXX (Legislative Assembly). More specifically, you have asked whether these amounts are required to be included in a Member’s income. We apologize for the delay in responding.

Based on the information provided, it is our understanding that:

* Members of the Legislative Assembly may sit for XXXXXXXXXX sessional days and XXXXXXXXXX days of committee meetings (where applicable);

* the Legislative Assembly is proposing to provide a Housing Allowance and/or Incidental Allowance to Members of the Legislative Assembly in situations where the particular Member:

o does not ordinarily live within commuting distance of XXXXXXXXXX (City); and

o maintains a residence that is his or her principal place of residence at a location outside of the City (and that is not within commuting distance of the City), and that is not rented to anyone during the period in which the individual is a Member.

* the Incidental Allowance is described as a daily amount paid to Members of the Legislative Assembly ($XXXXXXXXXX for each sessional or committee day, to a maximum of $XXXXXXXXXX per year) that is intended to defray a Member’s cost of meals and incidental expenses when performing duties related to the Legislative Assembly in the City;

* the Housing Allowance is described as a payment that is made directly by the Legislative Assembly to a landlord or hotel, to defray the cost of accommodations (leased or rented) incurred by a Member (to a maximum of $XXXXXXXXXX per year) when performing duties related to the Legislative Assembly in the City.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R11, Advance Income Tax Rulings and Technical Interpretations.

Pursuant to the definitions of “office” and “employee” in subsection 248(1) of the Act, an individual holding an office (which includes a Member of a Legislative Assembly) is an employee, and the person from whom the Member receives his or her remuneration is the employer.

The tax treatment of an employer’s payment of expenses incurred by an employee under the Act depends on whether the payment is a reimbursement or an allowance, and the nature of the expenses. In this regard, a reimbursement is a payment made to repay an amount an employee spent on a specific expense and for which detailed receipts are provided.

By contrast, an allowance is any periodic or lump-sum payment that an employee or officer receives without having to account for its use and is:

* usually an arbitrary amount that is predetermined without using the actual cost;

* usually for a specific purpose; and

* used as the employee chooses, since the employee does not provide receipts.

Based on the information provided, the payment described as an Incidental Allowance is likely an allowance, as it is a predetermined daily amount provided for a specific purpose, and for which receipts are not provided.

However, the payment described as a Housing Allowance is more akin to a reimbursement, as it is our understanding that the Legislative Assembly pays the Housing Allowance directly to a landlord or hotel, and that such payment is in respect of the actual cost of accommodation expenses incurred by a Member. It also appears reasonable to conclude that an amount paid by the Legislative Assembly under these circumstances would be supported by receipts (for example, a rental or lease agreement, or hotel invoice).

Reasonable travel allowances

Generally, paragraph 6(1)(b) of the Act requires that all amounts received by an employee in the year as an allowance for personal or living expenses (or as an allowance for any other purpose) be included in income, unless the allowance falls within the exceptions listed in subparagraphs 6(1)(b)(i) to (ix) of the Act.

Subparagraph 6(1)(b)(vii) of the Act provides an exception for reasonable allowances for travelling in the performance of the duties of an office or employment, away from the municipality and the metropolitan area, if there is one, where the employer’s establishment at which the employee ordinarily worked, is located. A travel allowance for purposes of subparagraph 6(1)(b)(vii) of the Act may include (among other things) an allowance that is provided to cover the meal and accommodation expenses incurred by an employee when travelling to perform the duties of employment.

While the reasonableness of an allowance is always a question of fact, an allowance that is reflective of amounts paid to Canadian federal government employees travelling on government business (see the appendices to the National Joint Council’s Travel Directive, available at www.njc-cnm.gc.ca/directive) is generally considered reasonable for purposes of subparagraph 6(1)(b)(vii) of the Act.

A further consideration is whether a Member of a Legislative Assembly who performs duties related to a Legislative Assembly in the City is travelling to perform the duties of employment. In this regard, where it is established that the duties of a particular Member are centered around their constituency office (i.e., the Member’s regular place of employment), it appears reasonable to conclude that the Member would be travelling to perform duties related to the Legislative Assembly in the City in the circumstances you describe.

In such cases, a reasonable Incidental Allowance provided to that Member would be excluded from income under subparagraph 6(1)(b)(vii) of the Act, provided that all other conditions set out in the provision have otherwise been satisfied.

Payments and reimbursements for travel expenses

Generally, an employer’s payment or reimbursement of an employee’s personal travel expenses is included in an employee's income under paragraph 6(1)(a) of the Act. However, if an employer pays for or reimburses an employee for expenses incurred by the employee when travelling to perform the duties of an office or employment, such payments will not generally give rise to a taxable benefit under paragraph 6(1)(a) of the Act.

Where it is established that the duties of a particular Member are centered around their constituency office (i.e., the Member’s regular place of employment), it would be reasonable to conclude that the Member would be travelling to perform duties related to the Legislative Assembly in the City in the circumstances you describe.

In such cases, an amount paid by the Legislative Assembly to a landlord or hotel would not be included in that Members income under paragraph 6(1)(a) of the Act, provided that the amount is:

* reasonable in the circumstances;

* supported by receipts; and

* within the annual limit described.

Furthermore, the Member must not have received a reimbursement, or otherwise be eligible to receive a reimbursement in respect of the accommodation costs so incurred.

We trust these comments will be helpful.

Yours truly,



Tom Baltkois, CPA, CGA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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