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New Zealand's Inland Revenue Department (IRD) has issued a guide on determining the taxable value for accommodation.
Generally, when an employer provides accommodation or pays an accommodation allowance to an employee, it is a benefit allowance for the employee and is taxable.
Accommodation includes board or lodging provided by or paid for by an employer, as well as the use of a house or living premises, whether permanent or temporary. However, certain accommodation or accommodation payments may be tax exempt if provided in: specific locations for out-of-town secondments or capital projects; or in connection with Canterbury earthquake reconstruction projects.
In its updated guidance, the IRD said that when an employer pays for accommodation on behalf of an employee, or pays an accommodation allowance to an employee, the taxable value is the amount paid, less any rent paid or other contributions from the employee, after any adjustments for business/work use of the premises.
When an employer provides an employee with accommodation, the taxable value is the market rental value of the accommodation: less any rent paid or other contributions from the employee; after any adjustments for business/work use of the premises; and after any adjustments for when employees share accommodation.
There are new rules to determine the taxable value of accommodation for employees working overseas and minister's of religion, the IRD said.
For taxpayers working overseas, there is an exception to the general valuation rule. This rule will apply whether the employer pays for accommodation on behalf of an employee, or pays an accommodation allowance to an employee. This situation allows the employer to use a New Zealand-based value rather than the market value of the overseas accommodation, if the New Zealand-based value is less than the value of the overseas accommodation. When establishing the value of a comparable New Zealand property the employer should take into account: where in New Zealand the employee would likely be working for the employer; the equivalent accommodation the person would likely occupy if living in New Zealand; and the average or median market rental values at or near the New Zealand location that the employee would've otherwise lived.
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