Beginning 2019 and subsequent tax years, non-accountable allowances paid to elected members, certain municipal officers and members of school boards will be fully included in income.
Prior to 2019, an exemption is available to certain individuals for a non-accountable allowance that is paid to cover expenses connected with carrying out work-related duties. This non-accountable allowance is excluded from income unless it exceeds one-half of the individual’s salary and other remuneration.
Changes for employers
Currently, in order to complete the employee’s T4 slip, an employer must identify both the taxable and exempt share of the allowance when a non-accountable allowance is paid to elected members of legislative assemblies, certain municipal officers and certain other individuals. The amounts are distinguished because only the taxable share is reported in box 14, “Employment income,” and subject to income tax and Canada Pension Plan (CPP) deductions at source.
For 2019 and subsequent tax years, the full amount of the allowance will be included in box 14 and subject to income tax and CPP deductions at source. Generally, amounts paid to elected or appointed officials are not subject to employment insurance premiums.