New tax rules for northern allowances

"Starting January 1, 1987 employers, employees, and other taxpayers are confronted with a new set of rules dealing with the taxation of travel and housing benefits relating to isolated posts in Canada, and tax deductions relating thereto. The new rules may not be the simplest in the world, but they are reasonably fair and at least offer a hitherto unknown degree of certainty as to how such allowances are to be treated. IntroductionThe first shoe fell on February 26, 1986 when Finance Minister Michael Wilson' s first budget presented the framework for the future tax treatment of travel and housing benefits (so-called ""northern allowances"") provided to residents in remote regions of Canada. The second shoe fell some ten months later on December 22, 1986 when the Minister of Finance filled in the earlier announced framework with detailed rules. We now have a complete picture of the tax treatment of northern allowances. Here is what the picture looks like with effect from January 1, 1987.According to Revenue Canada, the net housing benefit to employees will be equal to the value of the accommodation provided, less any rent they have paid. In major centres such as Yellowknife and Whitehorse, having a developed rental housing market, the benefit amount will be based on the fair market value of the rental accommodation in that location. In other areas, employers will be required to value the housing benefits and, to assist employers, Revenue Canada has provided the following guidelines: Common shelter- $100 per month including the value of subsidized utilities Apartment! duplex-$270 per month excluding the value of subsidized utilities, or $400 per month including the value of subsidized utilities House-$450 per month excluding the value of subsidized utilities, or $650 per month in- c1uding the value of subsidized utilities.The amounts established as the values of accommodation will be adjusted annually after 1987 based on the housing component of the Consumer Price Index."