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Taxation Issues for Golf Clubs

By Wayne Schweitzer

A Canada Revenue Agency (CRA) audit can be a pretty daunting experience, and when it comes with a large assessment payable, it can be downright frustrating. Adding to this frustration, it is possible that the rules may be different for individual circumstances and for different types of tax. 

Let’s consider a few scenarios for the application of the dreaded Income Tax on free golf that is provided to employees and “volunteers.” I’ve heard of some rather costly audits from the misinterpretation of the tax rules and their exceptions.

ANYBODY SLEEPING YET?  I know, tax rules tend to do that!

Scenario 1:

Staff at the Hack ‘n Slash are given unlimited privileges for golf at their club, assuming they play at times when they are not taking a tee time from a paying customer. A season pass at this club costs $1750, but employees are not required to pay this.

CRA has ruled that this constitutes a benefit to the employee, and therefore the $1750 should be added as a taxable benefit to the employee’s earnings. This benefit should be included on the employees’ T4 slip or a separate T4A can be issued.

Scenario 2:

Same situation as Scenario 1 except that some of your employees will only play 2 or 3 times per season, even though they could play at the end of any day they are on shift. Is it fair for them to have $1750 added to their income and have appropriate taxes deducted?  Of course not. So, CRA’s answer to this is to track how many times the employees play, and apply the appropriate green fee as a taxable benefit.  Someone who plays 3 times per week at the value of a twilight rate of $25 would break even at 70 rounds (comparing to a season pass of $1750).

On the other hand, an employee who only plays twice per month would have $50 of taxable benefits applied to their income.

The bottom line here is that you must track employee rounds in the event that you are audited by CRA. When discussing this with one golf professional I know, he simply shrugged and said they don’t write down the rounds on the tee sheet, so there is no way CRA can prove how much “free” golf was given to the employees. Never under estimate the resourcefulness of a determined auditor. Their jobs are collect taxes due, and most are very good at their jobs. They have several tools at their disposal, and based on their research, they can “deem” a certain amount to employees and appeals can be a long and expensive process.

Scenario 3:

Now let’s consider some of the retirees and senior “volunteers” you have doing several important duties, but in unpaid positions. These folks work a day or more per week, perform some on-call duties, and in return get no salary, but instead receive a “season pass” for golf. 

Since they don’t get paid, how can we issue a T4 slip? This must be the answer !! WRONG! These folks are receiving a benefit, and therefore the equivalent income may be taxable in their hands. So, in the case of a season pass valued at $1750, you should be issuing them a T4A slip recognizing the honorarium they have received. For many, this may not make any difference to the amount of income tax they pay, but for some, it may have an effect – you may wish to discuss this situation with your volunteers.

Now that you have the Income Tax issues figured out, let’s also consider some of the “interesting issues” with regard to the application of GST on some of these situations. In the scenarios above, we looked at taxable benefits as they apply but you need to be aware that GST may apply in some circumstances. Let’s look at the following:

The manager of one club I spoke with has a situation where all management, grounds staff, golf shop and back shop staff can golf because it is a part of their employment. However, the clubhouse service staff and kitchen employees do not receive this benefit as a part of their employment. By having this policy, they have actually created a tax liability where it could have been avoided.

In the case where only some of the employees receive this benefit, GST will apply to the  fair market value of the green fees.  So, even though the grounds department employee did not actually have to pay out any money, there was supposed to be GST collected. So if an employee plays golf on his day off and the market value of the green fee is $60, the club should be remitting ($60 X 5%) $3.00 to CRA.  Whether the club collects this from the employee is a matter of choice, but there is a liability to the club. 

If this club changes their policy to allow any employee to golf, this privilege would not attract GST. 

Clubs have so many variations on what they provide to employees and volunteers, it is worth a phone call to one of the 1-800 numbers at CRA to discuss your specific circumstances. This department has gone to great lengths to improve their customer service attitude, and I’ve found them extremely helpful with any questions I’ve needed to ask about. 

No, I’m not simply “kissing up” for fear that CRA will send an auditor after me! Those folks are there doing their job just like the rest of us. Sometimes it’s too bad they have to be so good at it!

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