A question of ‘reasonable’: CRA mulls airfare tax change

The Canada Revenue Agency says it’s considering changing the rules for northerners claiming a key travel-related tax deduction.

Currently, anyone living in the North who gets some kind of personal travel benefit from their employer – which is a lot of people – can claim a tax deduction.

However, figuring out exactly what that tax deduction should be is the subject of an annual mild kerfuffle. That’s because it usually involves identifying “the lowest return airfare ordinarily available at the time of the trip between the airport closest to the taxpayer’s residence and the nearest designated city to that airport.”

Law-abiding residents trying to get their taxes right often need half a day to understand that sentence, never mind figure out what the lowest airfare was, across all airlines, between the NWT and Edmonton (the “nearest designated city”) on the day they travelled.

While some airlines and tax accountants have taken to doing the math themselves then sharing the figures online, deciding what to put in that box on your tax return can feel more like art than science.

Enter the CRA, with a cunning plan.

“Northern residents have told us the difficulty they have in determining and documenting the lowest return airfare in relation to a trip,” the CRA declared in a news release on Monday.

“In response to these concerns, the CRA is proposing to simplify the lowest return airfare requirement.”

Here’s the new proposal:

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Current wording: “the lowest return airfare ordinarily available, at the time the trip was made, to the individual for flights between the place in which the individual resided immediately before the trip, or the airport nearest thereto, and the designated city that is nearest to that place.”

Proposed wording: “a reasonable amount in respect of return economy airfare for the date of travel that was ordinarily available, within a reasonable amount of time of when the trip was made, for flights between the place in which the individual resided immediately before the trip, or the airport nearest thereto, and the designated city that is nearest to that place.”

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So, what’s the difference?

Basically, if the proposed wording is used, you only need to possess the figure for what a roughly average return airfare would have been – it doesn’t have to be the absolute lowest – on the day you travelled.

The CRA says: “The proposed regulatory amendment would eliminate both the need to make the determination of the airfare on the actual day of travel and to ensure that it is the lowest available.

“Instead, the taxpayer would be required to determine a reasonable amount in respect of return economy airfare ordinarily available for the date of travel. For example, a claimant can obtain a reasonable airfare amount for the day of travel from a travel website in the days leading up to a trip.

“It is anticipated that the additional flexibility provided by the proposed regulatory amendment would reduce the administrative burden for taxpayers claiming the travel benefits deduction, while at the same time maintaining fairness by ensuring that the amount claimed for each trip is not excessive.”

The change wouldn’t have any effect on what is considered eligible. You would still need to have some kind of personal travel benefit from your employer, and have used some of that travel benefit in the tax year in question.

Many government jobs in the NWT, in particular, come with personal travel benefits that help employees to head home to other parts of Canada during the year.

However, what the change does introduce that’s new is the word “reasonable”.

What is a reasonable amount to pay for a return flight? When is a reasonable time to have identified that reasonable amount? The proposed wording doesn’t say – it leaves it up to you and the CRA to find a middle ground that everyone can look at and go: “Oh yes, very reasonable.”

The CRA probably expects everyone to have a roughly similar definition of “reasonable” but, if the history of human beings and tax assessment has taught us anything, there could be disagreements ahead.

With this in mind, the CRA has decided to open up its proposal for public feedback.

The three questions the CRA is asking of you, the taxed northerner, are:

1. Would it be preferable for the proposed amendment to specify what is intended by a “reasonable amount of time”? For example, should the regulation specify a number of days? Would the addition of this clarification be at the expense of reduced flexibility for individuals claiming the travel benefits deduction?
2. Is the term “a reasonable amount in respect of return economy airfare” easy to understand?
3. Would the proposed new requirement simplify the claiming of the travel benefits deduction?

If you have answers to those questions and a burning desire for the CRA to hear those answers, you can reach the Canada Revenue Agency by email before the deadline of April 17.

You can also view the consultation document in full, which sets out why the CRA thinks this might work.

People who do not possess any personal travel-related benefits from their employer were expected, as a result of Monday’s announcement, to remain miffed.