Here are the reasonable per-kilometre rates for 2023:
- $0.68 per km on the first 5,000 km driven
- $0.62 for every km driven beyond that
If you live in Nunavut, Northwest Territories or Yukon, it’s an extra $0.04 for each km driven.
What is Automobile Allowance?
When you use your own vehicle on an official assignment for work, you could receive a reimbursement for the mileage driven.
This allowance is paid by the employer.
If this allowance is considered ‘reasonable’ by the CRA, then CPP payments, income taxes and EI premiums shouldn’t be deducted from this allowance, and the allowance should be made as an added payment on top of the employee’s salary.
The allowance also wouldn’t be considered a taxable benefit.
The amount of the ‘reasonable’ allowance is meant to provide a general benchmark for employers to follow when deciding on a per km amount to pay their employees.
Criteria for Claiming Automobile Allowance
The reasonable per-kilometre automobile allowance rate indicated above should only serve as a guideline – the true reasonable rate will depend on other factors, such as the kind of car driven and the driving conditions.
In general, an allowance is considered reasonable if it meets all the following criteria:
- It is solely based on the kilometres driven for business purposes in a year
- The per-km rate is reasonable
- The employer did not previously reimburse the employee for costs related to the same use of the vehicle (with a few exceptions)
Let’s say, for example, that Natasha works as a sales rep for a food and beverage company, and uses her own vehicle to visit stores as part of her employment duties.
Her employer pays her the reasonable per-kilometre automobile allowance rate for only the kilometres she drives doing official company business.
In this case, the allowance would not be considered taxable and shouldn’t be a part of her income.
However, using the same example, let’s say Natasha was receiving $0.75 for every km driven.
In that case, the per km rate would be considered unreasonable since it’s much higher than the reasonable per kilometre allowance rate.
It would not meet the criteria for a reasonable allowance.
Historical Mileage Rates in Canada
A reasonable per-kilometre amount is set by the Canada Revenue Agency (CRA) – you can find it in the Income Tax Regulations, in section 7306.
You can find the historical reasonable per-kilometre allowance rates for the past 7 years in the table below.
|Year||First 5,000 KM||Each Additional KM|
Did You Know?
If you live in Nunavut, Northwest Territories or Yukon, the reasonable per-kilometre allowance is an extra 4¢ from the rest of the country for each km driven.
Frequently Asked Questions
- What is the kilometre rate for 2023?
$0.68 per km on the first 5,000 km driven
$0.62 for every km driven beyond that
If you live in Nunavut, Northwest Territories or Yukon, it’s an extra 4¢ for each km driven.
- How do you calculate the price per km?
The price per km is determined between you and your employer – sometimes, employers already have a rate in place that they use for all employees.
The ‘reasonable’ allowance is determined by the Department of Finance annually.