Leasing, Financing and the Taxable Benefit of an Employer Provided Automobile

There are many factors that come into play when purchasing a vehicle. When trying to decide between leasing and financing a vehicle, it can be difficult to determine what is the best option for you and your lifestyle. Leasing and financing a vehicle are both options that come with pros and cons. It ultimately boils down to determining what your personal financial goals are and which option is best suited to help you achieve those goals.

If you are an employer and you have determined that an employee will be using a company-provided vehicle for personal use, you must ensure that you meet the required tax reporting obligations. As an employer, you must calculate the taxable benefit to the employee of the vehicle, make the appropriate tax deductions and include the amount in the employee’s income when you issue their T4.

Whether you are investing in a vehicle for personal use or business use, let us help to break down the processes of leasing, financing and determining the taxable benefit of employer-provided automobiles:


Leasing a vehicle is like renting. You do not own the vehicle, but under many leasing contracts, you have the option to purchase it at the end of your lease agreement. Leasing is a good option for you if you aren’t interested in owning a vehicle for a long period of time and prefer to change your vehicle every few years. A leased vehicle is usually covered under warranty during the duration of your lease and tends to come with lower monthly payments than a financed vehicle because you are only paying for a portion of the capital cost of the vehicle.

At the end of a lease contract, you are required to either buy-out the vehicle or return it to the dealership and repeat the leasing process if you need another vehicle. Despite having lower monthly payments than financing a vehicle, over time, the cost of leasing several vehicles will eventually likely be higher than the cost of owning a vehicle. Leased vehicles also come with set kilometer-limits and going over these limits can result in hefty fees. Other penalties associated with leasing a vehicle can arise when trying to terminate a lease early or if there is substantial wear and tear on the vehicle.


When you finance a vehicle, you enter a contract where you make payments for a vehicle over a set period. Financing a vehicle means that you have 100% ownership of the vehicle once your automobile loan is paid off. Financing a vehicle can be a good way to help you build your credit. If you are financing a vehicle and want to return the vehicle, you can either re-finance or trade the vehicle in. These options are not available to you when leasing a vehicle.

The shorter your finance term is, the higher your monthly payments will be as payments cover the entire value of the car. For a financed vehicle, your vehicle is used as collateral for your monthly loan payments. Late monthly loan payments could result in hefty fees and increased interest rates. Any missed payments could result in repossession of the vehicle and serious damage to your credit score. Penalties for a financed vehicle could also occur if you end up stuck in a lengthy contract where you end up owing more in monthly payments than what the vehicle is worth.

Taxable Benefit of an Employer Provided Automobile

The calculation for the taxable benefit of an employer-provided automobile is comprised of two main components: the operating cost of the vehicle and a standby charge.

The operating cost includes gasoline, oil, maintenance charges, repair expenses, licenses, and insurance. It does not include interest cost, capital cost allowance, lease costs for a leased automobile and parking costs. In Newfoundland and Labrador, the operating cost for 2016 has a benefit that is equal to 26¢ per kilometer of personal use, for 2017, the benefit is equal to 25¢ per kilometer of personal use, for 2018, the benefit is equal to 26¢ per kilometer of personal use and for 2019 and 2020, the benefit is equal to 28¢ per kilometer of personal use.

The standby charge is intended to estimate the depreciation of the employer-provided automobile if the automobile is used for personal driving. The standby charge is based on the purchase cost or the lease cost of the automobile, the number of days that the automobile is made available to the employee and the actual extent of personal use. If an employer-provided automobile is used for as little personal use as possible, a reduced standby charge is applied to the taxable benefit calculation in order to reduce the tax implications for an employee. For 2003 and later tax years, a reduced standby charge is applicable when the employee uses the vehicle primarily for business purposes (more than 50% of the time) and the employee does not exceed 1,667 kilometers per month (20,004 kilometers per year) when the vehicle is used for personal driving.

If you need further assistance calculating the taxable benefit of an automobile, the Automobile Benefits Calculator on the CRA’s website is a helpful tool that can be found here.

Contact Clarified Accounting

If you are a small business owner that is currently using a vehicle or considering purchasing a vehicle for business purposes and have any further questions, please do not hesitate to contact Clarified Accounting.




Personal Tax

Hey everyone,

It’s everyone’s favorite time of year, personal tax season!

We’ve decided to put together a quick reference guide for things you may or may not know about personal taxes, key dates and some other useful information.

Here is what you should include with your personal taxes:

  • All slips that must be filed with the government (T4, T3, T5, T4E T4A, T4A(P), T4A(OAS), RRSP, etc.
  • Medical expenses – need to be over 3% of net income or roughly $2,300 (whichever is less) – can be claimed as a couple or family on 1 return (married couple and 2 children can claim on the same return)
  • Do you have a rental property? If so, you must include this income and relevant expenses.
  • Split Pension income – if one person in a couple has pension income, they are eligible for pension splitting (this has a HUGE potential savings depending on the couple)
  • Child care expense
    • Can claim:
      • Day care
      • Babysitter
      • Nanny
      • Overnight camps
      • Day camps during the summer
    • Cannot claim
      • Children’s activity receipts
      • Children’s arts amount
        • These used to be a deduction, but can no longer be deducted
  • Moving expenses
    • Did you move at least 40 KM closer to your place of work or school?
    • If yes, there are several items related to this you can claim
  • Did you sell your principal residence during the year?
    • No tax implications for this, but failure to report it can cause penalties with the CRA
  • Do you have any non-registered investments?
    • If yes, ensure anything that was sold gets reported as a capital gain or loss
  • Do you have any business income?
    • If yes, you will need to report all business income and expenses
  • Did you buy a home for the first time?
    • If yes, there’s a $5,000 1st time home buyer credit that can be claimed – if 2 people bought it together, they get to share the claim
  • Have you paid any interest on student loans?
    • If yes, this is claimable
  • Do you have any tuition fees?
    • These are claimable and able to be carried forward
  • Any donations – charitable or political?
    • Both can be claimed

Key Deadlines

  • Feb 28 – deadline to receive all slips required by government
  • Feb 29/Mar 1 (of the following year) – deadline to contribute to RRSP and claim for that tax year (March 1, 2019 to claim on 2018 taxes)
  • April 30 – deadline to file and pay all taxes owing
  • June 30 – deadline for people with business income to file – but taxes still must be paid by April 30

Helpful Suggestion

We recommend registering for the CRA MyAccount.  It is an incredibly useful tool that allows you to submit and view information/correspondence with the CRA.

Business Consulting in St. John’s

In psychology, we learn that entrepreneurs are of the creative persuasion.  I.e.  if you are a small business owner you probably think creatively rather than procedurally. To function, society needs both creative and procedural thinkers – and the same is true of any small business. As a St. John’s resident, you might have noticed that artisan shops and other creative endeavors fit in rather well in the local economy. That’s why we’re talking to you.

As a small business owner, even if you have the right kind of mind for business accounting, you probably don’t have the time.  So we thought it would be helpful to talk about some of the important advantages that business accounting services can bring to your St. John’s business.

How St. John’s businesses can benefit from accounting expertise:

Choosing an Entity Type

The variety of business entity types that you can register your enterprise under is larger than ever. At a glance, the differences between some of your options can seem trivial. Too often, new business owners make quick decisions about how to classify a business model for tax purposes and run into trouble later on. Our accountants are trained to know the difference and can help you avoid this common pitfall.

Designing Your Accounting System

Every successful business has a specialized system for accounting. By developing a specific procedural framework for accounting, it is easier to keep accurate records. More importantly, it is easier to fill in gaps in your records should they appear unexpectedly in the future- as they are almost certain to do. Business accountants can design an accounting system that is tailor made to suit your business model.

Tax Laws

Tax laws are complex and constantly changing. Our business accountants spend much of their time staying in the know on these changes so that you never miss a beat. Filing the right types of tax forms, separating personal and business taxes, and compiling records are just a few of the mission critical tax services that professional business accounting includes.

Specific Transaction Advice

The way large transactions are made can make a big difference to your bottom line over time. With expert business accounting advice such as whether to lease, rent, or buy, you can make sure your investments serve your St. John’s business in a way that is optimal- rather than just better.

Compile Financial Records

Finally, record keeping is an ongoing business need that only becomes more complex over time. As the primary driver of your business processes, it is impractical to devote yourself to these kinds of tasks. This is a great example of how investing in bookkeeping services will save you time and money in the long run.

Get in touch with Clarified Accounting today to learn more.

Source: https://www.entrepreneur.com/article/52324

Small Business / Tax Accounting in St. John’s

St. John’s is the easternmost city in North America and one of the oldest townships in Canada, but this unique city isn’t just unique geographically or historically. St. John’s is also known for taking style and originality quite seriously. It’s a little-known fact that many of the local housing ordinances require every home on a given block to be painted a different color. And that’s just where St. John’s obsession with style begins. Of course, the town is also well known for its picturesque beaches and the iconic watchtower, Signal Hill.

Small Business / Tax Accounting in St. John’s

It stands to reason that such a historically relevant and culturally rich location like St. John’s would be home to some of the most unique and enterprising kinds of small businesses you can imagine. Artisan shops and unique services of the sort that tend to thrive in such a culturally rich place also tend to have special challenges when it comes to compliance with tax law and other accounting issues.

Small, new, and start-up businesses, particularly those in innovative and artistic areas of expertise come with some pretty unique challenges. According to surveys of small business owners, the most common challenges to accounting are:

  • Managing accounts receivable/collections
  • Tracking cash flow
  • Managing all of the relevant paperwork
  • Closing the books every month
  • and Managing payroll

The researchers also found that no less than 71% of successful small businesses outsource at least one of their accounting functions.

This is a significant finding. Many professionals agree that the confluence of the 2008 recession, drop in oil prices and the surge in IT technology has reshaped economies in such a way that outsourcing, in general, is more valuable than ever. When it comes to accounting, the alternative means being proficient in maths, tax law, as well as the art and science of accounting.

Modern psychology tells us that entrepreneurs are essentially identical to artists from a temperamental point of view. That means- if you’re like most small business owners and start-ups, doing your own accounting is not a practical solution to the common problems listed above.

Here at Clarified Accounting, our mission is to fill in those critical gaps that can foul up your business process, and let you get on with doing what you do best. Get in touch today to learn more.






Financial Calculators

Planning for financial success is sometimes difficult if you have a new or small business. At the beginning of any new business venture, the constant pursuit for cashflow doesn’t allow you ample time to focus on saving money or planning your financial future. Fortunately, there is something that can help you; financial calculators give you instant financial information based on a few key numbers. Clarified Accounting now features 10 different financial calculators with various scenarios to help save you valuable time and money.

Our financial calculators determine financial information regarding:

Savings: Find out how much your RRSP or TFSA could be worth under varying scenarios.
Loans: Determine a monthly payment that’s comfortable for your budget.
Investment Income: Understand the long term potential value of an investment.
Investment Postponement: What are the financial implications of postponing yours or your client’s investments?
Tax Rates: Determine your provincial tax rates depending on your income through a simple tax calculator.
Inflation: Compare today’s buying power with historical or projected inflation.
RRSP Loans: Find out if borrowing to contribute to your RRSPs is a sensible route.
RRSP Tax Savings: Find out how much tax savings you will realise based on your RRSP contribution amount.
Retirement Budget & Savings: See a more accurate representation of your retirement budget based on inflation of the current dollar value.
Value of Human Life: Where do you stand economically?

Why are financial calculators so helpful?

When it comes to making important budgetary decisions, accuracy is crucial. Saving for the future often requires complex calculations and an understanding of current economic trends. Using a few simple numbers that you likely already know, such as your age and your annual income, you can get instant access to a wealth of knowledge that will help you better determine your financial future. Other benefits of using financial calculators include:

– Planning for the future
– Adjust your expectations or make changes to see results faster
– Fixing problems now
– Get on track of your objective
– Visualizing goals
– “Seeing” what your money can do will motivate you to continue saving.
– Understanding financial health
– If you’re unsure where you stand in terms of your goals, financial calculators can easily tell you how you measure up.
– Save time
– Our financial goals can often change. Don’t spend unnecessary time crunching numbers. Financial calculators provide instant and accurate information.

How do they work?

Select the calculator you want to use. It will help to have your financial information with you, such as bank statements, RRSP contribution documents, and monthly contribution amounts. Input the necessary information in the easy-to-use calculators. Watch how the results automatically generate. Change the information as much as you want to test out different scenarios. To save your results, simply click “print report”.

Clarified Accounting is dedicated to providing day-to-day accounting solutions for new and small businesses. Please don’t hesitate to contact us about how to use our financial calculators or for any other inquiries related to your financial future.

Small Business Accountants – St. John’s

Cash flow is the lifeblood of your business. Without a steady stream of money flowing through your operation, you’ll find it difficult to pay vendors and employees, invest in growing your company, and use valuable financial tools that could help increase your profits. Use these quick tips to start getting serious about your company’s cash flow.

Even if your Company’s sales are increasing, when money is going out faster than it’s coming in, your business can begin to struggle. Poor cash flow can end up getting your business stuck in the mud.

Here are three easy tips for improving your cash flow immediately:

Require deposits on large orders

Collecting accounts receivable can be a frustrating issue for any business. You work hard to build good business relationships, and you want to give a good faith extension of credit to valued partners, but long response times and late payments can put your business in a tough spot. Some common causes of cash flow issues faced by many businesses are:

– A large portion of receivables from business clients can exceed 90 days before payment is received
– Inefficient internal processes lead to significant delays before a customer receives an invoice. In some cases, the invoice is never received!
– A lack of formal credit policies

Not only are customers slow to pay, but many companies are often not properly organized enough to get payments quickly.

Charging deposits on larger orders is a fair agreement for both sides. A 50% deposit gives you the financial freedom to move forward without having to operate on credit and also lets your customers delay payment until they are 100% satisfied.

Pro Tip: Hiring professional accountants to complement your in-house bookkeeping can optimize your accounts receivable department by improving the billing process and streamlining communication with customers.

Analyse your cash flow with software and other tools

Adequate working capital is a critical component of business growth. If your business is not in a strong working capital position, you are going to find it difficult to maximize profits and growth. A profitable bottom line at year-end can feel misleading for a business that is struggling with cash flow.

Using various software packages or a employing the services of a professional accountant to help analyse payroll, accounts payable and receivable, and other financial aspects of your business can help you determine:
– where money is coming from
– where it’s going out
– the steps it would take to optimize it all

The result could be improved cash flow and profits for your business.

Consider high-interest savings accounts rather than brand-new upgrades

As a small business owner, it can be tempting to want the latest in technology, the absolute best equipment, and all of the bells and whistles that come with running a successful company. However, holding back on some expenditures in order to bolster your cash reserves can provide many benefits.

Instead of upgrading to new equipment, try repairs or buying used for the time being. Rather than getting the latest software, try for a budget version until you’re more stable. It might take some extra legwork on your side, but it will be worth it in the end. The money that you save can be put into an interest-bearing savings account. The cash will then be available on demand to finance a new project or to help your business grow.

Cash flow management is currently an issue for many businesses in Newfoundland & Labrador as our province deals with a sluggish economy. Whether it’s overdue receivables, or a lack of insight into cash flow, many companies struggle to manage their money. Working with a certified accountant can help to simplify these difficult processes and take away the stresses of dealing with them day in and day out. If you’d like to consult a professional accounting firm that can help clarify these issues for your company, contact Clarified Accounting today.