What is it?
Individuals can claim a GST/HST rebate on their personal tax return to recover GST/HST paid on eligible expenses unless their employer is a listed financial institution (a bank, insurance company, or a corporation whose principal business is lending money). Individuals can not claim a GST/HST rebate on eligible expenses that were reimbursed by their employer.
Purpose
The purpose of the GST/HST rebate is so employees can receive a refund on GST/HST paid on expenses for employment purposes as employees can not register for GST/HST in the way businesses such as sole-proprietorships and corporations can.
Examples of eligible expenses
Travel employees and commission employees can deduct eligible expenses such as parking, supplies, professional dues, and motor vehicle expenses such as gas, maintenance, and leasing. These expenses should be incurred for the purpose of employment and vary by eligibility on the type of employee you are: an ordinary employee, a travelling employee (you travel regularly for your employment), or a commission employee (some of your income is dependent on the commission you earn).
How it's calculated
Let's say in 2022, an ordinary employee spent $1,000 before tax or $1,130 including tax on parking and gas for employment purposes. These expenses are eligible for an ordinary employee when travelling for employment outside of their municipality, are required to pay for travel expenses and the employee did not receive a non-taxable allowance.
In Ontario 13/113 of the expense, representing an HST rate of 13%, would have been paid on the $1,130, equalling $130.
Check your receipt to confirm the amount of GST/HST you paid. In Ontario, GST/HST will be 5%, 8%, or 13%, depending on the expense. You would report the GST/HST you paid on the expenses.
Impact to your 2022 tax return
Complete Form GST 370 and file it with your personal tax return. A GST/HST rebate will decrease your tax liability, as the rebate would be entered on line 45700 on your 2022 income tax return.
Impact to your 2023 tax return
The GST/HST rebate of $130 you received will be an income inclusion in your following year's tax return. Report the income inclusion on your 2023 return.
- Archie, Young Tax Professional