PF1 Exam Dumps : Payroll Fundamentals 1Exam

Anne has both an automobile standby charge (because the car was made available) and an operating expense benefit (because the employer paid operating costs and she did not reimburse).

1) Standby charge (leased auto): Lease cost for standby charge purposes includes GST and excludes insurance.

Monthly lease incl. GST = $198.60 × 1.05 = $208.53.

Standby charge per month = 2/3 × $208.53 = $139.02.

Days available ÷ 30 = 365 ÷ 30 = 12.17, rounded to 12.

Annual standby charge = $139.02 × 12 = $1,668.24.

2) Operating expense benefit: Personal km = 34,134 − 15,805 = 18,329.

Optional method requires the automobile be used primarily (>50%) for business; Anne’s business use is under 50%, so the optional method does not apply and the fixed rate must be used.

Fixed rate (2026) = $0.34/km → 18,329 × 0.34 = $6,231.86.

Total taxable benefit = $1,668.24 + $6,231.86 = $7,900.10.

Because the plan is for the president only, it is a non-group insurance plan (a plan offered to an individual employee). The CRA states that when an employer pays premiums or makes contributions to a non-group insurance plan, the amounts paid are a taxable benefit. The CRA explicitly includes sickness or accident, disability, and income maintenance plans in this non-group category.

This benefit is generally treated as a non-cash taxable benefit because the employer is paying the premium directly to the insurer (the employee receives the coverage, not cash). CRA guidance distinguishes cash benefits (paid as money, reimbursements, or allowances) from benefits provided in a manner other than cash.

Payroll must therefore include the value of the employer-paid premium in the employee’s taxable income and report it on the appropriate slip (commonly T4 code 40 for current employees, as noted in CRA instructions for insurance premiums).

Payroll deductions are typically applied in a priority order to ensure the employer meets mandatory legal obligations first and avoids creating liability. Standard Canadian payroll training materials commonly present five categories withheld in this order: (1) statutory deductions, (2) legal deductions, (3) union deductions, (4) company-compulsory deductions, and (5) voluntary deductions.

Statutory deductions (CPP/QPP, EI, income tax, and where applicable NWT/Nunavut payroll tax) have top priority because employers are legally required to deduct and remit them.

Legal deductions (such as CRA requirements to pay/garnishments) are next because they are enforced by law and can create employer liability if not followed.

Union deductions follow where required by a collective agreement.

Company-compulsory deductions (for example, required benefit premiums) come after those.

Voluntary deductions (charity, savings plans, etc.) are last and only taken if funds remain.

Therefore, option D is the correct order.