CRA says northerners can claim in-territory travel on income taxes as GN calls for reform

The Canada Revenue Agency says northerners who didn't vacation south during the pandemic, can still claim northern travel on their tax returns this year.

The clarification follows calls for tax reform from Nunavut's finance minister, specifically for the CRA to enact three changes to the way the northern resident's deduction is calculated, both in the short and long term.

In August, George Hickes wrote to federal finance minister Chrystia Freeland, and national revenue minister Diane Lebouthillier.

He asked to allow Nunavut tax filers (and by extension, all northerners) to claim full travel benefits from their employers — also known as a vacation travel allowance, or a personal leave travel allowance, or Box 32 on a T4 slip — regardless if northerners travelled or not in 2020.

"This will allow Nunavummiut to remain in territory while a non-essential travel ban is in place, without losing an important tax benefit," Hickes wrote in the letter, obtained by CBC News.

"This is a particular issue in the context of COVID-19 as our governments encourage Canadians to stay close to home."

Hickes also asked for a more permanent change, in allowing northerners to claim expenses incurred for any travel, regardless of destination, opening the door to allow for northern travel to be claimed on a tax return.

"I do recognize that people have travelled, but a lot of people have been adhering to the rules," Hickes said in an interview with CBC.

"This is an opportunity to recognize the people that have been very conscientious to their communities and to their families."

Northern travel claims already allowed, CRA says

In statements to CBC News, the CRA wouldn't address the requests in Hickes' letter, but clarified northerners are already able to claim northern travel expenses on their tax returns, so long as they have receipts to back up their claims.

Of course, as always, taxpayers can only claim the lowest of three components: the employer benefit mentioned above, the actual cost of the trips and the lowest return airfare.

Regarding the lowest return airfare figure, the CRA says taxpayers don't have to had actually flown to a southern destination to claim the amount.

"Regardless of the destination or mode of travel, a taxpayer is required to provide the cost of the lowest return airfare available at the time of the trip between the airport closest to the individual's residence and the nearest designated city's airport to calculate the deduction for travel benefits," the CRA said in an email.

For example, the CRA said, someone traveling from Iqaluit to Rankin Inlet to visit family can use the lowest return airfare for a trip to Ottawa, since Ottawa is the closest designated city to Iqaluit.

Changes to lowest return airfare also proposed

In his letter, Hickes also requested the CRA adopt a standard amount for the lowest return airfare calculation, rather than leaving it to taxpayers to source themselves.

Right now, taxpayers must contact northern airlines to obtain a figure. But in 2019, the CRA proposed changes to how to calculate the lowest return airfare, essentially suggesting taxpayers take a screenshot of the lowest offered fare at the time of booking their ticket.

Consultations on the changes closed in April 2019, with no word from the CRA since. Those proposed changes were also never adopted.

Still, Nunavut's finance minister says the CRA needs to simplify the process, which triggers frequent reassessments.

"It's very dependant on the tax filer to gather the rates and the information from the airlines, and they're not always consistent," Hickes said in an interview.

"I think standardizing that information for tax filer would alleviate a lot of the pressure on the CRA, as well as residents of Nunavut of knowing what guidelines and what amounts are eligible."

Hickes said he's heard back from both Freeland and Lebouthillier, but only preliminarily. Northern Affairs Minister Dan Vandal is also involved in the discussions.