The rules · sources read on or since 14 September 2026
What is the taxable benefit when the company owns the car?
When a corporation owns or leases a car its owner also drives personally, that person receives a taxable benefit: a standby charge of 2% of the car's cost for each 30-day period it was available — or two-thirds of the monthly lease cost — plus an operating expense benefit of 34¢ for every personal kilometre driven in 2026.
The standby charge
The standby charge is a charge for *availability*, not for use. If the corporation owns the car, it is 2% of the cost — the tax-included cost, which is not the same figure as the CCA ceiling — for each 30-day period the car was available to the person. A car available all year is twelve periods, so a $35,000 car carries a standby charge of $8,400 before any reduction.
If the corporation leases, the charge is two-thirds of the monthly leasing cost for each period, where the leasing cost includes any down payment or trade-in prorated over the lease and the GST/HST and PST paid to the lessor, and excludes liability and collision insurance.
The reduced standby charge is the relief most owners qualify for and few know about. Where the employer requires the car to be used for the job, more than 50% of the distance driven is business driving, and personal driving is at or under 1,667 km per 30-day period (20,004 km in a full year), the charge is prorated by personal kilometres over that limit. All three conditions must hold; failing any one of them puts the full charge back.
The operating expense benefit
Separately from the standby charge, the corporation paying for fuel, insurance and repairs on a car driven personally creates a second benefit. The ordinary method is a prescribed rate per personal kilometre: 34¢ for 2026, or 31¢ for a person employed principally in selling or leasing automobiles.
Where a standby charge is included and the car is used more than 50% for employment, the person may instead elect the optional method — half the standby charge before reimbursements — provided they told the employer in writing before the end of the year. On heavy personal driving the election is often the cheaper of the two; the notice deadline is what makes it a decision to take in December rather than in March.
An amount the person reimburses the corporation reduces the benefit, but only if it is paid within 45 days of the end of the year.
Why the allowance method is usually the default
A personally owned car reimbursed at 73¢ per business kilometre produces a deduction for the corporation, no taxable benefit for the owner, and a recoverable GST/HST fraction — and needs no fuel receipts. A corporate car produces a deduction on actual costs and capital cost allowance, and a benefit on the owner's T4.
Which is better depends on the price of the car, the split between business and personal driving, and the province. It is a real decision with a real answer, and it is the kind of answer a CPA gives once and an owner then lives with for years. LedgerLodge computes the figures on both sides; it does not choose between them and it does not file the T4 the benefit goes on.
Where this comes from
- CRA — Automobile provided by the employer (T4130, chapter 2) — read 14 September 2026.
- Department of Finance Canada — 2026 automobile deduction limits and expense benefit rates — read 14 September 2026.
Questions
The taxable benefit on a company car.
How is the standby charge calculated?
2% of the cost of the automobile, including GST/HST and PST, for each 30-day period it was available to the employee. For a leased car it is two-thirds of the monthly leasing cost, including taxes and a prorated down payment but excluding liability and collision insurance.
When does the reduced standby charge apply?
When the employer requires the car for the job, more than 50% of the distance driven is business driving, and personal driving is no more than 1,667 km per 30-day period — 20,004 km in a full year. The charge is then prorated by personal kilometres over that limit.
What is the operating expense benefit rate for 2026?
34¢ per personal kilometre, and 31¢ for a person employed principally in selling or leasing automobiles. Both were confirmed unchanged for 2026 by Finance Canada in January 2026.
Can the operating benefit be half the standby charge instead?
Yes, where a standby charge is included in income, the automobile is used more than 50% in the course of employment, and the employee gave the employer written notice before the end of the year. The benefit is then half the standby charge before reimbursements.
Do reimbursements reduce the automobile benefit?
Yes, if they are paid within 45 days of the end of the year for the operating side. Amounts reimbursed for the standby charge are subtracted from it in the same way.
Is a per-kilometre allowance on a personal car a taxable benefit?
Not if it is reasonable, and using the prescribed rates — 73¢ then 67¢ for 2026 — is what makes it so. That is the alternative to the standby charge, and it is why most single-owner corporations keep the car personally.
Put a number on it.
LedgerLodge applies this rule to every record as it is entered, stores the calculation snapshot that produced the figure, and carries both into the year-end package your accountant works from. It prepares the figures a return is built from; it does not file anything.