To pay the correct tax on employer-provided accommodation you will need to know the accommodation’s market rental value.
If you provide an employee with accommodation that you have rented on the open market, then the market rental value is the rent that you pay. Accommodation owned by you or rented from someone who has a relationship with you needs a market rental value calculation.
Calculating rental value
You can use any reasonable process to calculate the market rental value. You could base it on:
- a valuation from a registered valuer
- an estimate of the market rental value from a real estate agent or property manager
- a review of comparable properties listed for rent
- any reasonable basis that takes relevant factors into account, such as location, size, condition, or access to schools.
You need to record the process you use to calculate the market rental value, showing how you made this calculation.
Contractual or employment-related matters cannot be considered when calculating the market rental value. For example, you cannot increase the value because the employee is required to live on site or lower the value because the employee could not afford the market rent.
The market rental value needs to be reviewed at least every 3 years.