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Andy Wong
Monday, June 11, 2007
Living in the North has certain advantages. For one, you get to claim the generous northern residents travel deduction, provided your employer pays you a Box 32 travel benefit.
While the travel deduction is generous, it is far from being simple. Pick any issue on this hot topic, i.e., what are allowable trip expenses, who qualifies for this claim, how many trips can be claimed, etc, and you spend hours discussing its intricacies. Which makes this a good time to ask, "What is a trip"?
You already know this - you can deduct your trip to Edmonton, Florida or the Philippines. But not all of us drive great distances or fly off to a sunny, southern destination. It is worth repeating you can only deduct trip expenses if you received a Box 32 travel benefit from your employer.
Is it a tax deductible trip if you live in Yellowknife and camped at the Prelude Lake Territorial Park, 30 kilometres away? What about the weekend excursion to Fred Henne Territorial Park, three kilometres from downtown Yellowknife?
If you live in Grise Fiord, Tulita or other remote communities, your favourite annual vacation could be a trip to your cabin or tent located across the river, the bay or outside your community. Are these trips out on the land a tax deductible "trip"?
The tax rules say you can deduct trip expenses but doesn't say what a trip is. To find out, you have to look to the dictionary. It turns out "trip" is a general word. It suggests going and returning to a starting place. It does not suggest the duration, distance or means of travel.
Therefore, my view is a weekend camping trip or any travel out on the land is as much a tax deductible trip as a faraway trip to a warm, sunny destination.
Now that you know what a deductible trip is, here's a test. Say you travelled from Yellowknife to Vancouver to visit relatives. Later, your family flew to Edmonton, met up with you there and all of you continued on to Halifax, before returning to Yellowknife. Did you take one or two trips? The Canada Revenue Agency (and I agree) would say one because you returned to Yellowknife once.
Tax being tax, which is to say there are always curve balls, here's a real-life example of a Northern trip that doesn't fit the bill. Say you live in Gjoa Haven and, being a teacher, spend your summer living off the land at your cabin 20 kilometres from the community. During the six weeks, you return to Gjoa Haven weekly to replenish basic necessities such as fuel, flour, sugar and fishing and hunting supplies. Did you take a six-week trip, or six weekly trips? It's an important distinction because the travel deduction limits you to claiming the costs of only two trips.
As you would expect, the CRA auditor said it was six weekly trips, since you did return home six times. But, did you return home or were you re-supplying at the nearest available store? After being explained the realities of living out on the land in an isolated Northern community, the auditor did agree it was a six-week trip and allowed the total costs of the trip.
In a future Tax Break: You don't drive or fly. Instead your dream vacation is a week-long boat trip on the lake (or snowmobile excursion on the frozen tundra). You can claim part of the cost of your boat (or sled).
Andy Wong is a tax consultant at MacKay LLP, Chartered Accountants in Yellowknife. He can be reached at andrew-wong@yel.mackayllp.ca.
