Benefit Allowances (accommodation, meals or clothing)

April 24, 2017

Benefit allowances are payments made to employees in addition to salary or wages, such as accommodation, meal or clothing allowances.

Benefit allowances also include accommodation, meals or clothing allowances when provided to the employee.

How to tax a benefit allowance

The taxable value of the benefit (the difference between market value and the amount paid by the employee) is added to the employee’s wages each pay period and PAYE is deducted from the total.

Determining the taxable value for accommodation

There are specific rules to determine the taxable value of employer-provided or paid accommodation.

Accommodation allowances (specific rules and tax exemptions)

The tax treatment of employer-provided accommodation or accommodation payments may be exempt from tax provided certain conditions are met.

Accommodation relating to Canterbury earthquake constructions

There is a transitional rule for employer-provided or paid accommodation for employees working on Canterbury earthquake reconstruction projects over the period 4 September 2010 to 31 March 2019.

Meal and clothing allowances (specific rules and tax exemptions)

Payments made to cover meal or clothing allowances may be exempt from tax provided certain conditions are met.

General information about benefit allowances

The rules around accommodation and meal allowances can be applied retrospectively subject to certain conditions and changes to the definition of the term “expenditure on account of an employee”.