Market Rental Value – valuing employer provided accommodation

As part of these changes, it was outlined that in general accommodation provided to the employee could be taxable to the employee under the PAYE system on the “Market Rental Value”, unless excluded under the provisions.

Determining the Market Rental Value has always been the more challenging part of these rules where accommodation is owned by the employer rather than rented from a third party. As such the Commissioner has recently released a statement (CS 16/02) outlining the Commissioner’s position and the operational approach being adopted when determining Market Rental Value for accommodation in NZ.

The Statement outlines factors which should be considered in determining Market Rental Value, but also factors which should not be considered. One point to note is that conditions arising out of the employment relationship itself should be irrelevant in determining market rental, which was commonly factored in previously when determining market value.

The Commissioner also states the accepted methods of valuation which includes the use of a registered valuer, real estate agent, property manager or other suitably experienced person and a review of comparable properties on internet sites such as Trade Me or some other method of comparison as long as it is reasonable. IRD states it does not have a preference, as long as reasonable care is taken and that it is documented.

The statement confirms much of IRD’s position which was established through responses to submissions last year, but it might be a good time to check your valuations are up to date.