Gift cards and taxable benefits: why it’s now easier than ever to thank your team
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While we’re all about Paying it Forward all year round, the “season of giving” is officially upon us! And if you’re looking for a way to thank your team for all their hard work, here’s an extra reason to celebrate: it’s now easier than ever to reward them with a little something extra.
What’s changed?
Effective October 18 and retroactive to the beginning of 2022, Canada Revenue Agency (CRA) updated their administrative policy to state that “if you provide your employee with gift cards, the gift card is considered non-cash” under the following circumstances:
- “It comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card.” For example: Restaurant and retail gift cards would be considered “non-cash”; pre-paid credit cards would not.
- “The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash.” This means ensuring that, if your employee wanted to return the gift card to the store in exchange for cash, they wouldn’t be able to do so per the store’s policy.
- “A log is kept to record gift card information.” This includes the employee name, date and reason gifted, type of gift card (certificates, chip cards, electronic), amount and retailer name(s).
Why does this matter?
This means that giving gift cards (up to $500 in annual combined non-cash value) to recognize your employees for their overall contribution to the workplace or other employee nominations can be much simpler than it used to be! By declaring the gift cards described above as “non-cash”, they’re now exempt from being considered a taxable benefit. Note: if a gift card is tied to a specific target, such as meeting or exceeding sales targets or completing a project, it's considered a "reward" and is taxable.
This is a win-win! It’s good for your employees because it won’t count as income on which they’d need to be taxed… and it’s good for you because it saves you a lot of hassle and payroll adjustments. So don’t be afraid to stuff those stockings and bring a little extra joy to your crew’s holidays!
Looking to explore taxable benefits further? Check out CRA’s T4130 Employers’ Guide - Taxable Benefits and Allowances.
We know that the nitty-gritty of payroll can feel overwhelming. You need a contact, not a call centre! That’s why we provide each of our clients with a dedicated, NPI-trained Client Service Representative who can help keep you confident and compliant. Visit https://www.payworks.ca/about-us/service-onboarding to learn more.
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