Here’s Alan’s reply:
The short answer is that paying all or a portion of an employee membership in a gym IS a taxable benefit. However, there are two key exceptions:
One is if the employer holds the membership, paying a fee to the gym that provides access to all employees. This is equivalent to the employer providing the gym facilities directly, which is not itself a taxable benefit.
The other is if the employer can clearly demonstrate, i.e. prepared to defend itself to the CRA, that it’s the employer who primarily benefits, i.e. at least 50%. This can happen in several different ways. The employer benefit might be sales related, such as networking and business development, or it could be part of a wellness program, with a demonstrated impact on employee absences, use of extended health benefits, etc.