IR has published a Commissioners Statement CS 16/02 which deals with determining the market rental value of employer provided accommodation. The statement is effective from 1 April 2015.
Where an employer provides accommodation to an employee, the value of that accommodation is assessable income of the employee and an employer is required to pay PAYE on the amount. Naturally when rent is paid to a third party on an arms-length basis, the value for PAYE purposes is the amount of rent paid. Where however the employee either stays in employer owned accommodation or in accommodation where the arrangement with the third party is not arms-length, the employer will need to determine what is a “market value” amount? The Commissioner does not dictate a particular valuation method to be used, instead suggesting several alternatives such as registered valuers, real estate agents or the employer undertaking their own research in respect of comparable properties on the market. The Commissioner does however expect the employer to take reasonable steps and exercise reasonable care in determining the “market value” amount, and to maintain proper records in this regard.
The Commissioner lays out several “can” and “cannot” factors in determining what is “market value”, most of which are common sense. She also suggests that the employer discuss the determined amount with their employee, as it may also impact on the employee’s entitlements/obligations with respect to family tax credits, student loans and child support. Finally CS 16/02 is only in respect of NZ provided accommodation and the Commissioner will provide separate guidance with respect to accommodation provided outside of NZ.