Understanding Living Out Allowance (LOA) for Contractors in Canada 2025
Byron Johnson | September 30, 2025
This guide walks you through what Living Out Allowance (LOA) is, how the Canada Revenue Agency (CRA) treats it in 2025, and how to calculate it without getting into trouble.
If you’re an oilfield contractor, welder, or tradesperson working in Northern Alberta or other remote regions, you’ve probably heard of Living Out Allowance (LOA) — sometimes called SUBSISTENCE. Done right, LOA can save you thousands in taxes each year. Done wrong, it can trigger audits, tax bills, and penalties.
What Is Living Out Allowance or LOA?
A Living Out Allowance is money paid by your employer (or your own corporation, if you’re incorporated and pay yourself as an employee) to cover meals, lodging, and incidental expenses while working away from your primary home.
The benefit? If your LOA is:
- Reasonable, and
- Meets CRA’s special work site or remote location criteria
Then the allowance is tax-free for you, but still deductible for your employer or your corporation.
How “Reasonable” Is Measured in 2025
While CRA doesn’t provide guidance on what is “reasonable”, The National Joint Council (NJC) publishes their per-diem rates. One could reasonably conclude CRA would accept these as a guideline for what’s considered reasonable.
CRA’s simplified rule: For 2025, the CRA generally accepts $23 per meal as reasonable if no receipts are provided. This is an administrative guideline, not a legal cap, but staying within it reduces audit risk.
NJC rates: The NJC publishes detailed per-diem rates (see table below), which are often higher than CRA’s simplified amount. Employers commonly use the CRA’s $23/meal limit for no-receipt claims and the NJC rates as a ceiling when receipts are available.
Receipts matter: CRA permits $23/meal without receipts, but under NJC rules, receipts must be provided for reimbursement—even within their published limits.
2025 NJC Rates
| Expense Type | Daily Rate | Notes |
| Meals | $113.50/day | Breakfast: $28.40 Lunch: $27.40 Dinner: $57.70 |
| Incidentals | $17.50/day | Covers tips, laundry, minor expenses |
| Private Accommodation | $50/night | If staying somewhere other than a hotel |
| Hotel | Actual cost | Keep receipts; must be reasonable for the area |
Rate Reductions
- Meals drop by 25% after 31 consecutive days at the same site
- Meals drop by 50% after 121 consecutive days
Example: Subsistence Allowance Calculation (2025)
| Description | Basis | Example Days | Daily Rate | Total | Notes |
| 50% deductible — travel 8 to 9.9 hours | CRA rule under s. 6(1)(b)(vii) | 5 days | $23 × 1 meal = $23.00 | $115.00 | Half-day travel, 1 meal covered |
| 50% deductible — travel 10 to 11.9 hours | CRA rule | 3 days | $23 × 2 meals = $46.00 | $138.00 | Longer travel day, 2 meals covered |
| 50% deductible — full travel day (≥12 hrs) | CRA rule | 10 days | $69.00 | $690.00 | Full day away, using CRA’s simplified rate |
| 100% deductible — remote location (≥36 hrs, 30 km+ from 40,000+ city) | NJC benchmark | 20 days | $131.00 | $2,620.00 | Meals + incidentals at NJC daily cap |
| 75% deductible — remote >30 days without return | NJC benchmark (reduced) | 15 days | $98.25 | $1,473.75 | 25% reduction after 31 days at same site |
Key Takeaways for 2025
- CRA’s simplified $23/meal rule (no receipts) is safe for basic travel days.
- NJC rates ($131/day) are a higher benchmark but require receipts.
- Reductions apply: after 31 consecutive days at the same site (25%) and 121 days (50%).
- Employers must document policies (e.g. TD4 forms, travel logs) to keep LOA tax-free.
Special Work Sites vs. Remote Locations
CRA allows LOA to be tax-free only if your job fits into one of these categories:
Remote Work Location
- At least 80 km from the nearest community of 1,000+ people
- It’s unreasonable for you to arrange your own housing.
- The employer doesn’t provide accommodations.
- You’re away for at least 36 hours.
- No TD4 form is required.
Special Work Site
- The work is temporary and away from your home.
- You maintain a home you can return to (not rented to someone else).
- Daily commuting isn’t reasonable due to distance.
- You’re away for at least 36 hours (including travel).
- You and your employer complete Form TD4.
Tips to Stay CRA-Safe in 2025
- Be an Employee, Not a Dividend-Only Shareholder: If you’re using LOA through your corporation, you must be paid as an employee (wages), not dividends. LOA is only available in an employee relationship. See our Salary vs Dividends guide for details.
- Always Have a TD4 Form: If claiming a special work site, CRA requires a signed TD4 between you and the employer/corporation.
- Document Everything: Keep a travel log with dates, sites, and purpose. Retain receipts unless using CRA’s simplified meal rate.
- Use CRA/NJC Rates as Your Ceiling: Staying within published rates minimizes audit risk.
- Don’t Double Dip: If you claim LOA, don’t also deduct the same meals or lodging as business expenses.
- Track Project Lengths: Remember the 25% and 50% meal reductions on long jobs.
Final Thoughts
Living Out Allowance can be a tax-efficient way to cover your costs when working away from home. Done properly, it’s deductible to the company and tax-free to you. Done poorly, it can create penalties and reassessments.
The key: stick to NJC rates, document carefully, make sure the right forms are signed, and ensure you’re taking LOA as wages—not dividends.
Still Confused With All of This?
You’re not alone. LOA rules involve multiple CRA definitions, rate schedules, and forms — and every contractor’s situation is different. If you’re unsure:
- Whether your site qualifies as special or remote
- How to structure LOA as a corporate owner-operator
- What rates you can safely claim without triggering CRA attention
📞 Contact us — we help tradespeople, contractors, and owner-operators set up LOA correctly so they maximize tax savings without audit headaches.
The more you understand these rules, the more money you keep in your pocket — and the less you send to CRA.
If you liked this article, check out our other contractor tax guides: How to Incorporate in Alberta: Your Crash Course on Incorporation
is a CPA and co-founder of NowCPA, known for helping business owners conquer challenges and reach their financial goals; with a strong background in finance and an Award of Excellence in the investment industry, he thrives on seeing people succeed.