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The information contained in this Q&A page is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, please contact me.

Q: What are the difference between 13% HST, zero-rated goods, and exempted rate? (2018-06-23)

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A: Taxable supplies: most of supplies in Ontario are subject to 13% HST, such as car repairs, soft drinks, advertising, legal fees, hairstylist service, sales and rentals of commercial real property. You collect HST when selling the goods/services, and claim ITC when purchase the goods/services for the business use. For example, you collected $500 HST when sell the goods, and paid $200 HST on the purchase. As the result, you need to pay $500-200=$300 HST to CRA when filing your HST return. Another example, you collected $400 tax when selling, and paid $750 tax when purchasing. As the result, you can claim a refund of $400-750=$350 when you file your HST return.

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  Zero-rated supplies: Basic groceries, agricultural products, prescription drugs, certain medical devices, exports, transportation services and feminine hygiene products belong to this category. You charge HST when you sell your goods/services. Because the rate is zero, what you collected is zero. However, you pay the 13% HST when you buy the goods/services for your business. In such a case, you can claim the ITC credit for the HST you paid. For example, you collect zero HST, and you paid $150 HST when you buy goods. So, you can claim $0-150=150 refund on your HST return.

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  Exempt supplies: Examples of exempt supplies are long-term rentals of residential accommodation, most health/medical/dental services, child care services, legal aid services, insurance, and music lessons. You don't charge HST when you sell such goods/services because they are HST exempted. At the same time, you can't claim the HST you paid for your purchases from vendors. 

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 Out of scope HST: means an item on a transaction will be left totally out of your HST calculations. It also can be treated as "non-taxable." It's basically not included in any calculations of your HST, such as SR&ED ITC refund.

 

Q: What is Mileage Log Book? (2018-06-26)

A: How to Keep a Mileage Log to Claim Motor Vehicle Expenses 

You Must Maintain a Log Book to Support Your Automobile Expense Claims for Using the Personal Vehicle for the Business

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  If you have used one or more of your personal-owned vehicles to earn business income over the past year, you can claim the related expenses as a business expense on your income tax by using a mileage log. 
But as always, if you want to deduct these expenses, you need to be able to substantiate your claim with evidence in the form of an automobile mileage log book.

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  How to Keep a Mileage Log

Canada Revenue Agency (CRA) states that keeping an accurate logbook of business travel maintained for an entire year is the best evidence you can have to support your motor vehicle expense claims.

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  CRA requires 4 components on the logbook: date, destination, purposes and number of kilometers driven. However, more information are better-to-have. The following is an sample logbook need to be filled out each time the vehicle is used for business purposes:

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  • the date,

  • the starting point,

  • the destination,

  • the purpose of your trip,

  • the vehicle starting mileage,

  • the vehicle ending mileage,

  • the total miles (or kilometers in Canada) driven.

         

  App Use - Automatic Mileage Tracking

Manually entering trip information in a log book is tedious, particularly if you make a lot of business trips. Fortunately there are several mileage tracking applications available for Apple and Android smartphones that make use of the phones GPS to keep track of every km driven for business purposes.

For a small monthly fee the app will log your business trip information and enable you to download a mileage summary your tax return. Some of the more popular mileage tracking apps include: MileIQ (IOS and Android), Mileage Expenses Log (IOS only), and TripLog (IOS and Android)

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  Even though records and supporting documents are only required to be kept for a period of six years from the end of the tax year to which they relate, the logbook for the full 12-month period must be kept for a period of six years from the end of the tax year for which it is last used to establish business use.

  If you use more than one motor vehicle for your business, keep a separate record for each vehicle that shows the total and business km you drive, and the cost to run and maintain each vehicle. Calculate each vehicle's expenses separately.

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  Good News  – You Can Use a Simplified CRA Mileage Log as Proof

The CRA now allows small business people to cut down on their logbook record keeping and use a three-month sample logbook to extrapolate business use for the entire year.

  To use a simplified logbook:

You must have previously maintained a mileage log for one complete year to establish a base year’s business use of a vehicle.

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  You must have kept this logbook for one complete year in 2009 or a later year.

Your business use of your vehicle for the year you are using the simplified logbook must be within 10% of the results of your business use of your vehicle you recorded for the base year.

The CRA also says that businesses will have to show that the use of the vehicle in the base year remains representative of its normal use.

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  All of these things being true, you would then be able to keep a logbook for just three months and then calculate your business use of vehicle by multiplying the business use as determined in the base year by the ratio of the sample period and base year period, by using this formula:

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  Automobile allowance rates

The automobile allowance rates for 2018 are:

55¢ per kilometre for the first 5,000 kilometres driven

49¢ per kilometre driven after that

The automobile allowance rates for 2016 and 2017 are:

54¢ per kilometre for the first 5,000 kilometres driven

48¢ per kilometre driven after that​

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