The employer, whose nurses used their motor vehicles in the course of their employment, paid its employees an allowance of 0.40$/km, while for any excess kilometres, the employer pays an allowance at the rate of 0.325$/km. However, where the kilometres were lower than 8,000 km, the collective agreement provided for an allowance of $0.40/km for the kilometres travelled as well as an allowance of $0.08/km for the difference between the kilometres travelled and the 8,000 km threshold.
After noting that “T4130 … states that when an employer pays an allowance that is a combination of flat-rate and reasonable per-kilometre allowances that cover the same use for the vehicle, the total combined allowance is a taxable benefit and has to be included in the employee's income,” CRA stated:
[P]art of the allowance paid to employees is based on a per kilometre rate that is considered reasonable while the other part of the allowance is not related to the use of the motor vehicle there are two allowances. The first, calculated at a rate of $0.40/km, would not be included in the income of the employees receiving it, while the second, calculated at a rate of $0.08/km, would be included in the income of the employees receiving it.