It’s Your Move

it’s Your move

Provision

The information contained herein is provided to assist transferred/released CF members, RCMP members

and Public Service employees. The information in this manual is based on reliable sources however

Brookfield Global Relocation Services assumes no liability for errors and/or omissions.

Brookfield GRS provides relocation advice and services. Brookfield GRS employees are not financial tax,

accounting or legal advisors. Brookfield GRS requests that transferees seek the independent advice of

professional advisors with respect to these issues.

It is your responsibility to confirm your benefits/entitlements under the Integrated Relocation Program. In

the event of conflicting or contradictory information, in all cases, the IRP policy document shall take

precedence.

LegaL DiscLaimer

Information provided in this publication is intended to provide general information. The user accepts full

responsibility for the use of any information provided in this manual.

The information is believed to be accurate, complete and current when written however Brookfield Global

Relocation Services cannot guarantee that it will remain accurate or complete or that it will remain current.

The information in this publication does not constitute accounting, consulting, investment, legal, tax

or any other type of professional advice, and should be used only in conjunction with the services of a

Brookfield Global Relocation Services advisor and any other appropriate professional advisors who have

full knowledge of the user’s situation.

Certain links referred to in this manual are maintained by third parties over which Brookfield Global

Relocation Services has no control. Brookfield Global Relocation Services makes no assurances as to the

accuracy or any other aspect of the information provided or indicated on such Websites.

Brookfield Global Relocation Services is not responsible for direct, indirect, special or consequential

damages, regardless of the cause, arising from the use of the information contained in this manual. The

information contained in this manual may not be used or copied for commercial use. Personal and non-

commercial use of the information contained in this document is accepted.

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Tax SmartCanadian Tax impliCaTionS of

ReloCaTion expenSeS

Taxes are as much a part of relocation as they are of any otheractivity in which money changes hands between employer andemployee. In some cases, there may be “taxable benefits” onwhich you have to pay taxes. In other cases, there may beexpenses that you pay and may be eligible to deduct for incometax purposes.

Either way, objectives are the same – minimize the taxes that youhave to pay and maximize the after-tax benefits that you areeligible for.

We recommend that you consult an independent and professionalfinancial planner to help with your relocation strategy and your financial planning.

Tax laws and regulations can and do change. Please note that this manual is intended only as a guide. What youcan and cannot claim will depend on your particular circumstances. What was accurate when we wrote this guidemay be out of date when you actually have to use it.

For most people, it comes as a bit of a surprise that taxes are even a consideration in relocation.

Tax deduCTible

In some cases, you may incur expenses during your relocation that are not paid or reimbursed by your employer.

For tax purposes, the question to be addressed is whether or not these expenses are “eligible moving expenses”.If so, they can be deducted from your employment income (you will need to use Form T1-M with your taxreturn).

According to The Canada Revenue Agency (CRA), you must relocate to a residence that is located at least 40kilometers closer to your new work location than your old residence.

Generally, only moves within Canada are eligible. However, there is an exception for individuals making foreignmoves if they are still considered to be Canadian residents.

do i Really benefiT fRom benefiTS?

A taxable benefit is treated as if the value that you receive is additional income. The tax that you pay will dependon your taxable income and the incremental tax rate of the province in which you are living as of December 31st.

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Here is an example:

Bob and his family are relocating from Ottawa to North Bay. Bob earns $65,000 a year and has a net income of$45,000.

If Bob receives a taxable benefit of $1,000 then his annual income increases to $66,000. Since he lives in Ontario,his incremental tax rate will be 22% for federal taxes and 9.15% for provincial taxes. He will then have to pay anadditional $311.50 in taxes to cover the taxable benefit.

Bob and his family are ready to move. Their household goods are packed and on the van but since they aren’tscheduled to leave for another week, they need to move into a hotel. The cost for meals and lodging for Bob, hiswife and their two children for the week add up to $1,900. These costs are reimbursed under the IntegratedRelocation Program. This is a non-taxable benefit. There are no taxes to pay with respect to this benefit.

It is, however, a hectic time. The children are underfoot. Bob, in desperation, puts the children in day- care. Thecost is $400. The expense is reimbursed but is considered a taxable benefit. When Bob gets his T4, he will seean additional $400 listed as a taxable benefit. It is treated as if it is income and Bob will have to pay an additional$124.60 in taxes.

Bob could see this as an unwarranted cost. On the other hand, he could argue that it only cost him $124.60 tolook after his children for a week – a savings of $275.40 and well worth it.

Which is the best option? There are no simple answers. It depends on your income and the marginal tax rate ofthe province in which you live at the end of the year.

non-Taxable benefiTS

For the most part, the money that you receive to cover your relocation expenses is a reimbursement and thereforeis not generally taxable. If you spend $1,000, you are reimbursed $1,000. There are no taxes. Those items areidentified as a “non-taxable benefit” in this guide.

Taxable benefiTS

According to CRA, taxpayers are generally taxed on the value of all benefits they receive by virtue of theiremployment, other than certain items that are specifically excluded from taxation.

If you receive $1,000 in taxable benefits, then you will have to pay taxes on this just as if it were part of your paycheque. If your incremental tax rate is, say, 40%, you would have to pay $400 in taxes. Nobody likes paying taxesbut the optimist would say that you receive $1,000 of value and it only cost you $400 – an absolute bargain.

Taxable benefits are shown on your T4 slip and must be reported on your income tax return. CRA has publishedan interpretation bulletin (IT-178R3) that outlines its views on eligible moving expenses. You can find this publicationon the Web at: www.cra-arc.gc.ca

In some cases, employees gain what are considered taxable benefits from arelocation (childcare while moving for example or taking your mother-in-law on aHouse Hunting Trip).

it’s your move

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example – Home equiTy aSSiSTanCe

example 1:

Sheila and her family are relocating from Moncton to Kingston. Even though Sheila has just had an addition builton her house in Moncton, the housing market is poor and she must sell the house for a loss.

The loss on the sale of the home would be calculated as follows:Net proceeds on home $160,000 Original cost of home $170,000Loss on sale of home ($10,000)

In addition to her loss on the sale, Sheila had also made capital improvements on the house at a cost of $10,000,which she did not recover. Sheila would receive the following reimbursements under the Core funding:

Home equity assistance (to a maximum of $15,000)

80% of $10,000 $8,000

under the non-core funding, she would receive:

Home Equity Assistance ($10,000 - $8,000) $2,000 Capital improvements $10,000Total reimbursements $20,000

Her taxable benefit would be:

Total reimbursements $20,000Maximum allowable non-taxable reimbursement $15,000Net amount $5,000Taxable amount (50% of the net) $2,500

Note that if Sheila chose not to take the $20,000 reimbursement, she would not be able to deduct the loss on thesale of her home on her income tax return.

example 2:

Pierre and his family are relocating from Val d’Or to Gatineau. Pierre has just completed renovating his home andhe too must sell the house at a loss.

Net proceeds on the sale of the home $175,000Original cost of home $170,000Gain on sale of home $5,000

Cost of improvements $10,000

Loss on sale of home due to capital improvements $5,000

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pierre would receive the following reimbursements under the core component:

Home Equity Assistance $ 0

He would receive the following reimbursements under the non-core funding:

Capital improvements $ 5 000

Since his reimbursement does not exceed the allowable non-taxable reimbursement limit of $15,000 he does nothave a taxable benefit on his T4.\

Tax impliCaTionS aCCoRding To CRa RegulaTionS

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TeCHniCal RefeRenCeS

**

Many of the technical references listed above and on the next page are only available through tax professionals.Please contact your accountant for additional information.

interim lodging,

meals and incidentals

(misc.

expenses/allowance)

Traveling to your new

location

Rental

accommodation

Selling your Home

Temporary dual

Residence assistance

(TdRa)

Technical References• T4130(E) “Employers’ Guide Taxable Benefits” Chapter 3, Board and lodging• IT-470R “Employees’ Fringe Benefits” paragraph 35• Income Tax Act, paragraphs 62(3)(a), (c)• Technical Interpretation 9918007 “Moving expenses”• Revenu Quebec Guide IN-253-V “Taxable Benefits” sections 6.1, 6.2, 6.8, 8.10

Technical References• T4130(E) “Employers’ Guide Taxable Benefits” Chapter 3, Moving expenses and

relocation benefits• IT-470R “Employees’ Fringe Benefits” paragraphs 35-36• IT-178R3 “Moving expenses”, paragraphs 12-22• Income Tax Act, paragraph 62(3)(a) • Revenu Quebec Guide IN-253-V “Taxable Benefits” sections 8.10

Technical References• T4130(E) “Employers’ Guide Taxable Benefits”, Chapter 3, Housing – Rent-free

and low rent• Income Tax Act, subsection 6(23) “Employer-provided housing subsidies”• Income Tax Act, paragraph 62(3)(d) “Moving expenses”• Technical Interpretation 9821655 “Relocation expenses employee”• Revenu Quebec Guide IN-253-V “Taxable Benefits” sections 6.1, 6.8, 8.10

Technical References• T4130(E) “Employers’ Guide Taxable Benefits”, Chapter 3, Moving expenses and

relocation benefits• IT-470R “Employees’ Fringe Benefits”, paragraphs 35-38• IT-178R3 “Moving expenses”, paragraphs 12(e) & 16• IT-120R6 Principal Residence• IC 72-17R5 “Procedures concerning the disposition of taxable Canadian property

by Non-residents of Canada”• Income Tax Act, paragraph 62(3)(e) “Moving expenses”• Income Tax Act, subsection 6(23)• Technical Interpretation 9913025 “Payment of relocation costs by employer”• Technical Interpretation 9913795 “Moving expense (mortgage penalty)”• Queen vs. Merton A. Collin 86 DTC 1477, DTC 6369 (FCTD) – Mortgage Interest

Buy Down• G. Pollard vs. MNR 88 DTC 1110 (TCC) – Interest paid as Mortgage Penalty• Revenu Quebec Guide IN-253-V “Taxable Benefits” section 8.10

• IT-421R2, “Benefits to individuals, corporations, and shareholders from loans ordebts”, paragraph 4

• Income Tax Act, subsection 80.4(1)

Technical References• T4130(E) “Employers’ Guide Taxable Benefits”, Chapter 3, Moving expenses and

relocation benefits• IT-178R3 “Moving expenses”, paragraph 12(g)• Income Tax Act, subsection 6(23) “Employer-provided housing subsidies”• Income Tax Act, paragraph 62(3)(g)• Technical Interpretation 9821655 “Relocation expenses employee”• Technical Interpretation 9921675 “Reimbursement of interest on Old home”• Technical Interpretation 9913025 “Payment of relocation costs by employer”• Revenu Quebec Guide IN-253-V “Taxable Benefits” section 8.10

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it’s your move

Many of the technical references listed above and on the next page are only available through tax professionals.Please contact your accountant for additional information.

Taxable benefiTS on youR finanCial WoRkSHeeT

Each year, your T4 form arrives in the mail signalling that once again it’s tax time.

Having just been through a 0relocation only complicates the issue. Fortunately, you have been working withBrookfield GRS under the IRP and keeping careful track of expenses. Just what is considered to be a taxablebenefit is already worked out. You just need to know where to find it.

Remember that brookfield gRS needs to know where you are in order to send you the T4. if you move, let

your Relocation advisor know immediately.

loss on equity

buying your new Home

$25,000 Home

Relocation loan

Technical References• T4130(E) “Employers’ Guide Taxable Benefits”, Chapter 3, Moving expenses and

relocation benefits• IT-178R3 “Moving expenses”, paragraph 12(f)• Income Tax Act, subsection 6(23) “Employer-provided housing subsidies”• Income Tax Act, subsection 62(3)• Technical Interpretation 9918007 “Moving expenses”• Revenu Quebec Guide IN-253-V “Taxable Benefits” section 8.10

Technical References

• T4130(E) “Employers’ Guide Taxable Benefits”, Chapter 3, Moving expenses andrelocation benefits

• IT-178R3 “Moving expenses”, paragraph 12(f)• Income Tax Act, subsection 6 (23) “Employer-provided housing subsidies”• Tachnical Interpretation 9918007 “Moving Expenses”• Revenu Quebec Guide IN-253-V “Taxable benefits” section 8.10

Technical References• T4130(E) “Employers’ Guide Taxable Benefits”,Chapter 3, Interest-free and low-

interest loans• Income Tax Act, subsection 6(9) “Amount in respect of interest on employee

debt”• Income Tax Act, paragraph 62(3)(e) “Moving expenses”• Technical Interpretation 9918007 “Moving expenses”• Technical Interpretation 9907486 “Moving expenses”• Revenu Quebec Guide IN-253-V “Taxable Benefits” sections 8.9, 8.10

• IT-421R2, “Benefits to individuals, corporations, and shareholders from loans ordebts”, paragraphs 20, 21, 22

Shipping your Household

goods and

effects

Spousal Job Search

assistance

Technical References

• T4130(E) “Employers’ Guide Taxable Benefits”, Chapter 3, Moving expenses andrelocation benefits

• IT-470R, “Employees’ Fringe Benefits”, paragraph 37• Income Tax Act, subsections 6(20),(21) “Benefit re eligible housing loss”• Technical Interpretation 9913025 – “Payment of relocation costs by employer”• Revenu Quebec Guide IN-253-V “Taxable Benefits” section 8.10

Technical References• Income Tax Act, paragraph 6(1)(a)• Income Tax Ruling 9425775 “Taxable Benefits”• Income Tax Ruling 2008-0276771E5 “Taxable Benefits – Relocation”

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As a rule, the salaries and wages that must be entered on the RL-1 slip are those paid:

• To an employee who reports for work at an establishment of the employer in Quebec;• To an employee who, though not required to report for work at an establishment of the employer (in

Quebec or elsewhere), is remunerated by an establishment of the employer in Quebec.

For example purposes, the following scenario is provided with the calculations and resulting tax slips.

Mr. Smith moves from one location in Quebec to another location in Quebec and during the tax year he receiveda base allowance of $650 plus a cash payment of $5,608.08, a benefit related to home inspection purchase in theamount of $375.00 and an interest subsidy in the amount of $192.65. Since Mr. Smith is moving within Quebec,a RL-1 must be produced in addition to a T4.

Mr. Smith was earning $2,535.89 of salary every two weeks.

The illustration below summarizes the method of calculating the amounts that are included on both the T4 and theRL-1 with an example of each tax slip following.

box on line on Tax

Tax Slip ReTuRn deSCRipTion

T4 R1 T1 TP1

14 A 101 101 employment income The total income before deductions appears in Box 14. It includes

all salary, wages (including pay in lieu of termination notice), bonuses, vacation pay,

tips and gratuities, honorariums, director’s fees, management fees and executor’s and

administrator’s fees received to administer an estate (as long as the administrator or

executor does not act in this capacity in the regular course of business)

16 N/A 308 N/A Employee’s Canada Pension Plan (CPP) contributions

17 B 308 98 Employee’s Québec Pension Plan (QPP) contributions

18 C 312 N/A Employee’s Employment Insurance (EI) premiums

22 E 437 451 Income Tax Deducted

36 Note N/A N/A interest-free and low-interest loan An M/E who used non-core funds to reduce the

interest on their mortgage through the home relocation loan has received a taxable

benefit. The amount earned in that calendar year will be reported in box 36. This amount

included in box 14/A and is used for reporting purposes only.

37 Note 248 297 employee home-relocation loan deduction Although a benefit amount was

reported in box 36 for the subsidized loan interest, an M/E who receives a low-interest

home-relocation loan through CIBC in entitled to an offsetting deductible portion, which

will appear in Box 37. This amount is a deduction on line 248 of the personal tax return.

It has not reduced the amount in box 14.

40 L N/A N/A Other taxable allowances and benefits. This amount is already included in box 14 and

is used for reporting purposes only. Box L includes the interest-free and low-interest loan

amount shown on box 36 of T4.

55 H 375 97 Quebec Parental Insurance Plan

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Taxable Benefits T4 Amount T4 Box RL-1 Amount RL-1 Box

Personalized Cash Out + 5,608.08$ 5,608.08$

Add : Non-accountable Cash Allowance + 650.00$ 650.00$

Total Taxable Benefits = 6,258.08$ 6,258.08$

Less : Non Accountable Allowance deduction - 650.00$ 2,535.89$

Add: Non-cash taxable benefits (home inspection purchase) + 375.00$ 375.00$

Total Other Taxable Allowances = 5,983.08$ 40 4,097.19$ L

Interest Subsidized Loan benefit + 192.65$ 36 192.65$ Note

Total Taxable Employment Income = 6,175.73$ 14 4,289.84$ A

Deduction Calculations T4 Amount T4 Box RL-1 Amount RL-1 Box

Federal Tax ($5,608.08 x 26%) 1,458.10$ 22

Provincial Tax ($3,722.19 x 24%) 893.33$ E

Canada Pension Plan ($5,608.08 x 4.95%) N/A 16

Quebec Pension Plan ($3,722.19 x 4.95%) 184.25$ 17 184.25$ B

Employment Insurance ($5,608.08 x 1.36%) 76.27$ 18 76.27$ C

Quebec Parental Insurance Plan ($3,722.19 x 0.506%) 18.83$ 55 18.83$ H

2 Week Deduction Calculation for RL-1 Calculation of taxable portion of the personalized cah payout for RL-1

Monthly Salary 5,494.42$ Personalized Cash Payout 5,608.08$

x 12 = Yearly Salary 65,933.04$ Non-accountable cash allowance 650.00$

/ 52 = Weekly Salary 1,267.94$ Non Accountable Allowance deduction (2,535.89)$

x 2 = 2 week Deduction 2,535.89$ 3,722.19$

Note: No deductions on non-cash taxable benefits

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example of a T4 Slip

example of a R1 Slip

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What do i do if i notice an error on my T4 received from brookfield gRS?

If you believe that your T4 is incorrect you should contact your Brookfield GRS Advisor. They will discuss the issuewith you and if there is a requirement to correct the T4 an AMENDED T4 will be issued within 2-3 weeks afternotification. Brookfield GRS will also send a copy of the amended T4 to CRA explaining the problem. This way theincorrect T4 will be discarded and not used for calculation purposes.

What do i do if i have not received or lost my T4?

If you have not received your T4 by March 15th, contact your Brookfield GRS Advisor at destination and a“DUPLICATE” T4 will be issued to you with 1-2 weeks upon notification.

Why have i received two T4s and a Rl-1?

If you have received two cash payments in two different provinces, one of which is Quebec, separate T4s have tobe issued indicating the payment and deductions for each location. Also you will receive a RL-1 for the cashpayment made in Quebec. Please note that the amount reported on the RL-1 in box A is less than the amountreported on box 14 of the T4 issued for Quebec as you are allowed to take a deduction of 2 weeks salary.

What are the federal and provincial tax rates and how do i use them?

Since each province has a different tax rate, moving from one province to another can have a significant impacton your after tax income. The following amounts/rates are for the 2008 taxation year.

Federal tax is calculated, on Schedule 1 of your tax return, by applying a basic rate of 15% on the first $40,726of taxable income. The next $40,726 of taxable income is subject to a rate of 22% and the next $44,812 of taxableincome is subject to a rate of 26%. The maximum rate of 29% is applied to any excess over $126,264 of taxableincome. The Basic federal tax is then calculated by subtracting non- refundable tax credits and, if applicable,certain other credits or adjustments.

Under the current tax on income method, provincial tax for all provinces (except Quebec) and territories iscalculated in the same way as federal tax. Some provincial or territorial surtaxes and reductions might also apply.

For purposes of calculating the amount to withhold when a M/E is paid cash allowance, the table on the next pageshall be used. The amount withheld is based on a flat rate and will not exactly correspond with your individual taxrate. In the event that too much tax is withheld, you will receive a refund or a reduction of taxes otherwise payablewhen you file your annual tax return.

note: For Quebec there is another deduction for Parental Insurance Plan of 0.45%.

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Why have i received a T4 several years after my last move?

If you have used non-core funds to reduce the interest in your mortgage through the “Home RelocationLoan” you have received a taxable benefit. The low interest loan earned in the previous calendar year calculatedby Group Mortgage Plan will be reported in box 36. This amount is included in box 14 and is used for reportingpurposes only. Although this amount is effectively not taxable because you are provided with an offsetting deductionin box 37, the CRA rules state that this amount must still be reported as income.

When you complete your Tax return enter on line 248 the total of the amount shown in box 37 of your T4.

Please note that this amount is not captured in the system. It was provided by Group Mortgages Plan.

Province Federal Tax Provincial Tax EI CPP/QPP Total Tax

NL 26% 14.39% 1.73% 4.95% 47.07%

NS 26% 17.50% 1.73% 4.95% 50.18%

NB 26% 14.30% 1.73% 4.95% 46.98%

PEI 26% 16.70% 1.73% 4.95% 49.38%

QC 26% 24.00% 1.36% 4.95% 56.31%

ON 26% 11.16% 1.73% 4.95% 43.84%

MB 26% 17.40% 1.73% 4.95% 50.08%

SK 26% 15.00% 1.73% 4.95% 47.68%

AB 26% 10.00% 1.73% 4.95% 42.68%

BC 26% 14.70% 1.73% 4.95% 47.38%

YT 26% 12.76% 1.73% 4.95% 45.44%

NT 26% 14.05% 1.73% 4.95% 46.73%

NU 26% 11.50% 1.73% 4.95% 44.18%