Canada tax agency pitches minor change to northern residents benefit

Proposal affects only those who receive vacation travel allowances


National Revenue Minister Diane Lebouthillier speaks in Iqaluit in April. (FILE PHOTO)

National Revenue Minister Diane Lebouthillier speaks in Iqaluit in April. (FILE PHOTO)

Claiming that the move will simplify the northern residents deduction, Canada’s national tax collection agency is proposing a minor change to the vacation travel portion of the northern residents benefit.

The proposal follows an announcement this past August from Diane Lebouthillier, the minister of national revenue, who said the Canada Revenue Agency will spend $6 million to set up permanent tax offices in each of the three territories.

At that time, her officials promised the CRA would look at changing the rules that set out how people can apply for the travel portion of the northern residents deduction.

The travel benefit is only available to northern tax-filers who receive some form of vacation travel assistance from their employer. Those who receive no VTA cannot claim the benefit.

The proposal, described within an undated page on the CRA’s website, changes the method of calculating the size of the air fare that a tax-filer is allowed to deduct from their taxable income.

Under the new proposed rule, an eligible northern tax-filer would have to deduct “a reasonable amount in respect of return airfare [that would] be obtained for the date of travel within a reasonable amount of time of when the trip is made.”

That’s a change from the current method, in which the tax-filer has to claim the lowest of the following options:

• The value of the travel benefit received from the employer.

• The actual cost of the trip (supported by receipts).

• The lowest return airfare available at the time of the trip between the airport closest to the taxpayer’s residence and the nearest designated city to that airport.

Effectively, that usually means that it’s the “lowest return airfare available at the time of the trip” that determines how much a tax-filer may deduct.

But the CRA said they found that requirement is confusing to many northern tax-filers.

That, in turn, explains why so many northern tax returns end up being audited or re-assessed, the CRA claimed last August.

The CRA said it will soon publish a consultation paper on the proposal on the federal government’s website,

“Canadians will have a further opportunity to provide input when the proposed regulations are pre-published in Canada Gazette, Part I for a 30-day comment period in early 2019,” the CRA said.

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