I had the very pleasant experience a few weeks ago sitting down with a past client of ours. He left the industry almost a decade ago when he received his commercial pilot’s license. He built up his hours flying up North and is now a pilot for West Jet (they got a real good guy).
Before we talked he went through our industry analyst blog (Canada Truck Operators) email@example.com. We discussed “per-diem, subsistence/meal/travel allowance” and the employer-employee agreement. My pilot friend discussed how his agreement works. Apparently he receives $4.00 for every hour he is away from his home terminal and (same as the trucking industry) it’s classified as a non-taxable benefit. That means he gets $96.00 per day tax free, no receipts needed. This is compared with the popular $83.25 listed on the Treasury Board of Canada sight http://www.tbs-sct.gc.ca/pubs_pol/hrpubs/tbm_113/c-eng.asp as of April 1, 2009. Other industries, such as the pipeline industry, get anywhere from $95-125 per day tax free, depending on accommodation and agreements.
There are many industries that use the system with varied terms of agreements. Some agreements are as detailed as “…if the employee leaves their home before 8:00am they qualify for breakfast… otherwise they qualify only for lunch…”. The variation of agreements are too numerous to calculate. They can (and usually are) more generous than CRA’s guidelines for the TL2 “ …$51.00 per day (subject to reductions and conversions)… …must be away from terminal for longer than 24 hours… or 160 KMS…”
One of the primary keys to tax savings for a lease/owner operator lies in the employer-employee agreement, the terms of which can be very generous. However, I strongly recommended a realistic approach. The simple rule should be, if CRA accepts the terms of one agreement it must be acceptable for all (See Equality under the Charter of Rights and Freedoms). Two approaches that seem to work well are: One meal for every four hours in travel status (for those who break meals up in a day) or a simple yes/no question such as were you in travel status longer than 8 hours today? So far, for properly applied agreements, it has worked fantastic (knock on House of Commons wood).
Success or failure will always be determined by: a sufficient audit trail, and the willingness of your accountant to defend the returns against rogue auditors. In this case, the simple rule should be “if you signed a waver… your on your own!”. Over the next several years operators will be using the system more and more. Unfortunately, if it’s not applied correctly some operators will be hung out to dry. I’ve written many articles warning of the insufficient application. I hope you’ve done your homework. Payday comes in the form of low tax bills.