Providing living accommodation to employees is a common practice, but understanding its value is crucial for both employers and employees. In this guide, we’ll explore how to determine the value of living accommodation, considering legal provisions and practical considerations.
Understanding defined value
Defined value refers to the monetary worth of living accommodation provided by an employer to an employee.
- Leased accommodation (Not subject to rent control laws):
- If the accommodation is not subject to rent control laws and the employer holds it on lease, the defined value is the hypothetical rent that would have been paid if the accommodation were unfurnished. This assumes that the lessor and lessee are independent parties.
Other cases (Rateable value or economic rent):
- In situations where the accommodation is subject to rent control laws or other restrictions, we use alternative methods:
- Rateable value: Determined by local rating authorities for assessment rates.
- Economic rent: The expected rent if specific conditions were met.
Calculating the value
Living accommodation for employees (excluding government or statutory body officers)
- The value of the accommodation benefit can be determined as follows:
- Option A: Use the defined value of the living accommodation (as explained above).
- Option B: Calculate 30% of the employee’s gross income from employment, including wages, allowances, and perquisites (excluding benefits-in-kind and share options perquisite). Choose the lower value between Option A and Option B.
- Additional deductions are allowed, including expenses paid by the employee (such as rent, public rates, insurance premiums, and repair/maintenance costs).
Living Accommodation for Directors of Controlled Companies
- Similar rules apply, but specifically for directors (not service directors) of controlled companies.
Living Accommodation for Government/Statutory Body Employees
- The same principles as mentioned above apply.
Important Considerations
- Time: If the accommodation is provided for less than 12 months, the benefit should be proportionally adjusted.
- Employee Expenses: Deduct any expenses paid by the employee (e.g., rent, public rates, insurance premiums, repair/maintenance costs).
Remember that while this guide provides a simplified overview, precise calculations should consider legal requirements and professional advice. Employers and employees alike should stay informed and seek expert guidance when necessary.
To gain additional information or seek any help, contact us at Zentrusted or Whatsapp us.
This content is for informational purposes only and does not constitute professional advice. Always refer to the official websites/guidelines/regulations of the relevant authorities for detailed information and consult with a professional for personalized guidance.