Treating free employee parking as a taxable benefit

Parking lot 5 | Ward 2 | BurlingtonCity staff currently receive free parking downtown, and a contribution is made to the Downtown Parking Reserve Fund each year for the value of that parking, calculated at $217k this year. Employees have the choice of free parking, or a free monthly transit pass, and some employees choose the transit pass. A contribution is made to transit for the value of those passes, calculated at $16k this year.

The transit pass is treated as a taxable benefit for those employees who receive it, but the free parking benefit at the moment is not treated as a taxable benefit.

At the budget meeting, council approved my motion to direct staff to report back on an implementation plan to treat employee parking as a taxable benefit. When staff report back later this year, they will outline required notification, potential costs and implications related to the status for union and non-unionized city employees, downtown local board employees and members of Council.

Below is some background information from the Canada Revenue Agency on when parking must be treated as a taxable benefit. This is an area of risk for the city, taxpayers and its employees. In a case in Kitchener where employees had free parking, Revenue Canada said it should have been a taxable benefit and the city ended up paying over $1m in back taxes owed on behalf of employees to correct this. Read more here.

Exemptions to taxable benefit
According to the CRA, employer-provided parking is usually a taxable benefit for an employee. The amount of the benefit is based on the fair market value (FMV) of the parking, minus any amount the employee pays to use the space. One of the requirements for making parking a taxable benefit is the ability to assign a “fair market value.” Burlington city employees are assigned to lots which do have a posted hourly, daily and monthly market rate, and the monthly value of that market rate is recorded as a transfer from the city into the Parking Reserve Fund. So the fair market value threshhold is met.

There are some exceptions to treating free parking as a taxable benefit:
• If the employee has a disability, the parking benefit is generally not taxable. Some city employees might qualify here; the majority would not.

There is no taxable benefit for an employee when both of the following conditions are met:
• You provide parking to your employee for business purposes.
• Your employee regularly has to use his or her own automobile or one you usually supply to do his or her duties.

Note: Travel between work and home is not considered travel for business purposes.

Most city employees would not qualify for both of the exemptions above.

Read the CRA rules here.

Fair Market Value and Scramble Parking

According to the CRA, if a fair market value cannot be determined, it would not be added as a taxable benefit to employee remuneration.

This could happen in the following situations:
• A business operates from a shopping centre or industrial park where parking is available free of charge to both employees and other people.

• You provide scramble parking. Scramble parking is still a benefit to the employee, but in the absence of the ability to accurately assign a value to the benefit because of the random or uncertain nature of it, a benefit is not included in income.

Examples – Scramble Parking

The following examples explain what is and is not considered scramble parking.

Scramble parking
• Where there are 35 parking spots and 60 employees who want parking.

Not scramble parking
• There are enough parking spaces for all employees who want a parking space on a daily basis but it is “unassigned parking”, meaning employees are not assigned to a particular parking space.
• There are 50 parking spots and 52 employees wanting parking. Therefore, most employees will find a parking spot every day.
• There are 100 employees and 75 parking spots. All employees are provided with a parking pass but 30 employees do not drive to work. Therefore, only 70 employees want parking spots on a daily basis.
• There are 400 parking spots and 600 employees wanting parking. The business runs 3 equal shifts over a 24 hour period. Therefore, not all employees want parking at the same time.
• An annual company-wide meeting results in a significant number of employees being unable to find parking on the day of the meeting due to the attendance of teleworkers and shiftworkers, but on regular workdays, most employees are able to find a parking spot.

Read the CRA rules on scramble parking here.

In Burlington, there are enough parking spaces for all employees who want a parking space on a daily basis but it is “unassigned parking”, meaning employees are not assigned to a particular parking space (but they are assigned to a particular lot). Our lots have a maximum permit threshold of 80% subscribed (a policy set by the downtown parking committee), which means 20% of the lot is available for driveup customers, i.e. there are more spaces than permits. Therefore, it is not scramble parking.

The exception is the Brock St lot which is currently oversubscribed (115 permits sold for 71 spaces) because many permits have been sold to nurses at the hospital while the parking garage is being built. Many of these workers are shift workers and not in the lot at the same time as city staff. Therefore it is not scramble parking as “not all employees want parking at the same time.” This falls under the fourth bullet of “not scramble parking.”

My Take: We don’t have any choice in my view but to treat employee parking as a taxable benefit. The CRA rules are clear that our program qualifies for a taxable benefit because it can be assigned a fair market value and does not meet the exemption criteria or the definition of scramble parking.There is substantial risk to the city and its employees of a ruling by the CRA to treat this as a taxable benefit and collect back taxes.

Your Take: Should free employee parking be a taxable benefit? Leave a comment below.

Treating free Burlington city employee parking as a taxable benefit
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Treating free Burlington city employee parking as a taxable benefit
We don't have any choice but to treat Burlington city employee parking as taxable benefit. CRA rules clear as it has market value and isn't scramble parking

Written by Marianne Meed Ward

I was inspired to seek public office because I believe, like so many of you, “I can do something about that” on the issues we face. As councilor, my role is to take a stand on what’s best for residents and go to bat for it. Pushback is inevitable from those who don’t have the community’s interests at heart. I will stand with you and for you, to achieve the best interests of our city, without caving to unacceptable compromise in the name of consensus.


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  1. The free parking benefit absolutely needs to be a taxable benefit. Ultimately, these employees need to pay the full freight. This is a biased free ride. I sense that the key people will not leave the city were the benefit removed.

    As a side note … When I coached a varsity team at the University of Guelph ( I was not a school employee, I was a volunteer ), the parking was a taxable benefit on the pass that I would need to purchase. I opted to pay the daily rate. If this benefit were to be eliminated, I suspect that employees would reduce their costs through alternate strategies.

  2. Absolutely for CRA legal purposes as stated and frankly to help eliminate or at least mitigate the “entitled” feeling that most people have of government employees – on all levels. The present set up is just not fair.

  3. Parking should be a taxable benefit for city employees. If we just look outside Burlington most employees have to pay for parking in a busy down town area. This has been a luxury for employees which is nice but the tax payers have been paying for this not the city, and this free parking has not been offered to all employees to the downtown core, only to City Hall employees, really not fair.

  4. Deedee, Yes, taxable benefit is the first step. The CRA rules are clear that city employees don’t qualify for exemptions and our parking doesn’t meet the definition of “scramble” as there is ample supply (more spaces than permit holders) and a fair market value can be assigned, as the city charges the public for these lots.

  5. The federal government determined its civil servants should pay fair market value and not receive any free parking. Municipal workers get a better deal by only having a taxable benefit.

  6. I am against ‘free parking’ for Civic employees. Why should the City pay employees’ parking while at work. Our Daughter has worked at both McMaster U and the Ham. General Hospital, and had to pay parking for parking at both. Offer them the free transit option, and if they decline, they pay their own way.

  7. Parking should be a taxable benefit for city employees

    Too bad teachers aren’t charged for all the free parking at schools. Just think of the revenue.

    • Good point John. There truly is no such thing as “free parking.” The costs to build, maintain and shovel parking lots is paid for one way or another. The future is to have the user pay. The more we move in that direction, the more we will encourage people to car pool, cycle take transit or live closer to where they work.

    • City employees already have the option of a free transit pass , how can we possibly provide free untaxed parking as well . At a minimum the parking is a taxable benefit but it should be rolled back ASAP . Rather than consider a salary increase the city should provide notice of intent to cut out parking at a future date , say 6 months , I believe that would be sufficient for not invoking constructive dismissal , if necessary make the notice longer for some longer service employees . User pay is indeed the way to go and I suspect other communities such as Toronto are not providing both free transit passes and free parking .

  8. I can see free parking for City employees being a taxable benefit. However, the employee should be assured there is a space available at all times. will that happen?

    • Thanks for the question Phyllis. Employees are assigned to specific lots. The maximum number of permits allowed in any lot is 80% – therefore there is 20% more parking in each area than permits, so yes, everyone get a spot. The only difference is the Brock St lot which temporarily has more permits than spots (115 permits, 71 spots) because a number of these are for nurses at the hospital working shift – i.e. not in the lot at the same time necessarily as city employees. This is also a temporary situation. An 800-space parking garage at the hospital will be finished later this year so hospital staff can park there (and the monthly rates at the hospital are half the city rates).

What's your take?

Marianne Meed Ward

Ask the Councillor: Parking at 399 Elizabeth St.

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