Can fitness equipment for a corporation be deducted?
By John R Mott | November 5, 2011
My wife and I are physicians in Alberta and are employed by our joint professional corporation. Is there a way the corporation could deduct the expense for fitness equipment (to be used by ourselves and two more employees)?
John R Mott answered:
This is one of those gray area issues. Canada Revenue Agency (CRA) has published an opinion that fitness club membership fees are not a taxable benefit where the membership was principally for the employer's advantage rather than the employee's. For example, if you could successfully argue that your employees need to set an example for your patients by being fit, the fitness equipment could be depreciated as an expense of your practice and you would not be required to report a taxable benefit on their annual T4 slips. I think it is reasonable to equate fitness equipment to a fitness club.
If that was the end of the story, that would be great. Even though you and your wife would be considered employees of your professional corporation, I think it is entirely possible, however, that CRA could find that you and your wife received a benefit qua shareholder, rather than qua employee. They would argue, for example, that personal physical fitness is principally a personal expense, not a business expense and that you used corporate funds for personal use. You could be denied a deduction in the corporation, assessed a taxable benefit or both.
I think how you proceed should depend mainly on your tolerance for risk. If you need to be squeaky clean with the tax authorities in order to sleep at night, then don't do it. However, if you are of the view that nothing ventured is nothing gained, then go for it. As explained above, you certainly have a defensible position.