Question

Understanding the difference between a cash taxable allowance, a cash taxable benefit and a non-cash taxable benefit is critical when explaining the calculation of net pay to an employee. In your own words, explain whether each allowance and benefit is or is not subject to Canada/Québec Pension Plan (C/QPP) contributions, Employment Insurance (EI) premiums, Québec Parental Insurance Plan premiums and income tax. Provide an example of a cash taxable allowance, a cash taxable benefit and a non-cash taxable benefit.

Answer 1

Cash Taxable Allowance- It is when an amount is paid to an employee for use of or expected use of employee's personal property for business. An example, is when an employer reimburses the employee for the use of their car for business. Cash taxable allowance is considered an employment income so it is subject to the statutory deductions which is included gross earnings (GE), gross pensionable and taxable income (GPTI) and gross insurable earnings (GIE).

Cash Taxable Benefit is when the employer pays directly to the employee for a benefit then it is considered a cash taxable benefit. An example would be when the employee gets a gym membership and the employer directly pays the amount to the employee with prove of a receipt.

Non-cash Taxable Benefit- It is when the employer pays the money to a third party that benefits the employee. For example, when the employee gets a gym membership, the employer pays the amount directly to the gym which is an indirect benefit to the employee