The per-kilometer rate that is considered reasonable in 2024 by both the Canada Revenue Agency and Revenu Québec is set to 70 cents in a province for the first 5,000 kilometers. This is a 3% increase in comparison to the rate set for the previous year which was 68 cents for the first 5,0000 KM. For amounts after 5,000 kilometers driven in a province, the rate is set to 64 cents. This rule is applicable both for GST/HST/QST purposes and for income tax purposes.
For the territories, the rate is set to 74 cents a kilometer for the first 5,000 KM and 68 cents a kilometer after 5,000 KM.
So, lets take as an example a company where it is projected that on average their employees will be reimbursed the maximum rate in 2024 and these employees will drive on average 20,000 kilometers in relation to activities of that company.
The amount to be reimbursed to each employee would be $13,100 and is detailed as follows:
|KM projected in relation to employer activities
|First 5,000 KM
|After 5,000 KM
Alert once the 5,000 KM threshold has been reached
If your organisation has a policy to maximize reimbursement of the KM rate for its employees when they use their own vehicle for business purposes, and you are giving a 70 cents refund to your employees per business kilometer incurred; get an alert when each employee will reach 5,000 KM in 2024 so you can lower the rate to 64 cents for that given employee in Advataxes.
This should be done in order to avoid giving your employees’ KM allowances at a rate that will exceed the legal rate. In that case, the allowance will be deemed unreasonable and your organization will be subject to income tax and sales tax assessments.
Efficient Digital Transformation
Getting an alert when the 5,000 KM has been reached is part of an efficient digital transformation of an online expense report process as well as automating the flow of approval, automating the GST/HST & QST recoverable, etc…
To get more details on the rules for reasonable kilometer allowances, read our blog for the 2023 KM rate increase.
You should note that the IRS has also raised their mileage rate in 2024 for business use to 67 cents per mile.