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OPERATIONAL STATEMENT
Income tax treatment of accommodation
provided to employees
Issued: 10 June 2021
OS 21/01
Operational statements set out the Commissioner of Inland Revenue’s view of the law in
respect of the matter discussed and deal with practical issues arising out of the
administration of the Inland Revenue Acts.
This statement is intended to clarify and simplify the tax rules around employer-provided
accommodation.
All legislative references in this Statement are to the Income Tax Act 2007, unless specified
otherwise.
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Contents
Background .............................................................................................................................. 2
Summary of approach ........................................................................................................... 3
Application of this statement .............................................................................................. 4
Definitions ............................................................................................................................... 4
Part 1: Is taxable accommodation provided to the employee? ...................................... 5
Is what is supplied to the employee “accommodation” under the Act? .................................... 5
Even if what is provided is accommodation, do any of the exemptions apply? ...................... 8
Employee accommodation – out-of-town secondments and projects
(section CW 16B) ............................................................................................................................. 8
Employer-provided accommodation – ongoing multiple workplaces ........................... 14
Employee-provided accommodation – meetings, conferences and training courses 16
Part 2: What is the value of the accommodation subject to tax?................................ 18
What are the general valuation rules? ................................................................................................ 18
Value where the employer physically provides employee accommodation .................. 18
Value for accommodation allowance or payment of accommodation expenditure ... 18
Rent paid by the employee ........................................................................................................ 20
Work use of accommodation .................................................................................................... 20
Shared accommodation – apportionment of taxable value .............................................. 21
Accommodation provided to employees working overseas – exception to the
general rules .................................................................................................................................. 22
Accommodation provided by religious bodies to ministers of religion ........................ 24
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Background
Some employers provide accommodation for their employees. They may provide the
accommodation directly or fund the cost of it - by paying the cost on behalf of the
employee, by reimbursing the employee for the cost incurred, or by paying the employee an
accommodation allowance.
Generally, where an employer incurs expenditure that gives rise to a private or domestic
benefit to an employee in connection with their employment that expenditure is taxable to
the employee. The provision of accommodation or the funding of the cost of
accommodation is an example of this kind of expenditure.
The general rule where an employer provides accommodation (whether directly or by
funding it) is that the employer must withhold and pay the resulting PAYE on the value of
what the employee receives.
Despite this general rule, in specific circumstances accommodation related to an employee’s
role is exempt from tax.
This Statement deals with the tax treatment of:
the provision of accommodation by the employer or the payment of an
accommodation allowance to the employee;
reimbursement by the employer of accommodation expenditure incurred by an
employee (also known as expenditure on account).
The purpose of this Statement is to clarify when these circumstances apply and to assist in
determining the amount of tax payable.
The Statement is divided into two parts: Part 1 covers when employer-provided
accommodation will be taxable, and Part 2 covers how to calculate the resulting tax liability.
Examples are provided throughout the statement to illustrate the outcome in different
scenarios.
Employers often provide not only accommodation but also travel for their employees. These
employers may find it useful to refer to the Commissioner’s position on employer provided
travel: Operational Statement OS 19/05
: Employer-provided travel from home to a distant
workplace – income tax (PAYE) and fringe benefit tax (Inland Revenue, 2019).
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Summary of approach
1. In determining whether accommodation provided to an employee is taxable the
following should be considered:
Does what is being provided to the employee fall within the definition of
“accommodation” in the Act?
2. Some types of accommodation are specifically excluded from the definition such as a
room, berth or other lodging provided on a mobile workplace such as a ship, a truck or
an oil rig or accommodation provided in a remote location outside New Zealand. If
the accommodation is excluded, then it is not taxable. (See the discussion from [7]
to [12])
The second question is: Even if the accommodation is not excluded, do any of the
exemptions apply?
3. Even if what is provided is within the statutory definition of “accommodation”, it may
still be exempt from tax if it falls into one of the expressly provided for exemption
categories:
out-of-town secondments and projects;
1
ongoing multiple workplaces;
2
meetings, conferences and training courses.
3
See the discussion in [13] to [47].
4. Once it has been established that the accommodation provided is taxable, the value of
the accommodation provided needs to be determined. Generally, the value of the
accommodation is based on the market value of what is supplied, but specific rules
may vary this. This is addressed in more detail from [48] onward.
1
Section CW 16B.
2
Section CW 16F.
3
Section CW 16D.
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Application of this statement
5. This statement clarifies the Commissioner’s existing position on the tax treatment of
employer provided accommodation to an employee.
Definitions
6. In this Statement:
Employer includes a person, who, in connection with the employment or service
of an employee of the employer:
o provides accommodation for the employee; or
o pays an amount for the employee’s accommodation.
Employer-provided accommodation means:
o accommodation an employer organises and pays for;
o accommodation an employee organises but the employer pays for;
o accommodation an employer reimburses an employee for; or
o an allowance paid to an employee by their employer to cover the cost of
accommodation.
Home means a dwelling the employee uses as their residence.
Hometown means the city or town where the employee’s home is located.
Workplace means a particular place or base:
o at which an employee performs their employment duties; or
o from which an employee’s duties are allocated.
This means that a workplace is not confined to premises of the employer but can
also be any place from which the employee performs employment duties, which
could be a client’s premises.
A distant workplace is a workplace that is not within reasonable daily travelling
distance of the employee’s home.
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Part 1: Is taxable accommodation provided to the
employee?
Is what is supplied to the employee “accommodation” under
the Act?
7. Accommodation is defined in section CE 1(2) as including “board or lodging, and the
use of a house or living premises (or part thereof), whether permanent or temporary”.
8. Ordinarily, “board or lodging” refers to the provision of the employee’s meals and
somewhere to sleep.
9. What is considered accommodation under the Act is, therefore, quite broad, so all
manner of living arrangements can fall within the definition. As discussed above
accommodation includes both accommodation directly provided by the employer, paid
for by the employer, or paid for by the employee (which is then reimbursed by the
employer).
Example 1
Barbara, Karen and Vanessa all live and work in Wellington and are employees of
an apartment developer. Their employer has just completed an apartment
building. Three apartments in the building are still vacant. As a bonus to the
employees for their good work, the employer offers each of them the right to live
in their own apartment rent-free for 12 months.
Barbara moves into an apartment and lives there for 12 months.
Karen already has an apartment of her own. She asks if, instead of moving into
one of the apartments, she could have money instead - to the value of the new
apartment’s weekly rental. Her employer agrees and pays her that amount per
week as an accommodation allowance.
By the time Vanessa decides whether she will take up the offer, all the remaining
apartments have already sold. Vanessa decides to rent an apartment from one of
the new purchasers, and her employer agrees to pay the rent to that owner on
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Each employee in this example has received accommodation from their employer
for the purposes of the Act. The accommodation will be taxable to each
10. As accommodation provided to employees is taxable income to them, their employer
is typically obliged to withhold the tax payable on their behalf (like a salary and wage
payment). Inland Revenue is aware that some employers choose to “gross up” these
payments to the employee – in essence paying for the tax arising from the
accommodation on the employee’s behalf instead of deducting the tax from the
employee’s wages.
11. Some types of accommodation are explicitly excluded from the broad definition, and
as a result are not subject to tax. These types of accommodation are:
a berth, room or other lodging provided on a mobile workplace such as a ship,
truck or oil rig;
4
a station in Antarctica;
5
a room or lodging provided for shift workers such as fire-fighters, ambulance
staff and caregivers when they are periodically required to sleep at their
workplace and the accommodation is provided only for the duration of the
performance of the duties;
6
accommodation provided at remote locations outside New Zealand where an
employee is expected to “fly in and fly out” such as mines in Australia;
7
and
temporary accommodation provided to manage outbreak or spread of COVID-
19.
8
12. Flowchart 1 assists in determining whether the employer has provided accommodation
that is excluded:
4
Section CE 1(2)(b)(i).
5
Section CE 1(2)(b)(iii).
6
Section CE 1(2)(b)(iii).
7
Section CE 1(2)(b)(iv).
8
Section CE 1(4) and the Income Tax (Employment Income—Meaning of Accommodation)
Regulations 2021.
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Flowchart 1: Determining whether the employer has provided accommodation that is excluded
Start
What type of board or lodging has the employer
provided the employee?
…a berth, room or other lodging provided on a
mobile workplace (such as a ship, truck or oil rig)?
…a station in Antarctica?
No
…a room or lodging that is provided for a shift
worker who is required periodically to sleep at their
workplace when the accommodation is provided
only for the duration of the performance of those
duties(such as for on duty fire-fighters, ambulance
staff or caregivers)?
… the use of a room or other dwelling provided at a
remote location outside New Zealand when a
person’s employment duties require them to work
at the location for a period and also requir
e them to
be absent from the location for a period (such as fly
in fly out miners)?
…temporary accommodation provided to manage
outbreak or spread of COVID-19.
Refer to whether the
exemptions apply
The employee has not
derived income under
s CE 1(1)(bb)
No
No
No
No
Yes
Yes
Yes
Yes
Yes
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Even if what is provided is accommodation, do any of the
exemptions apply?
13. Certain types of employer-provided accommodation, which are included in the
definition of “accommodation”, may still be exempt from tax. These exemptions fall
into three broad categories:
out-of-town secondments and projects (discussed from [15]);
9
ongoing multiple workplaces (discussed from [39]);
10
conferences and overnight stays (discussed from [43]).
11
14. It is important to note that none of these exemptions will apply if employer-provided-
accommodation is provided under an explicit salary trade-off arrangement (that is, if
the employee opts to receive a lower salary than what they are otherwise entitled to in
exchange for accommodation provided by the employer).
12
Accommodation provided
under such an arrangement will be taxable income to the employee.
Employee accommodation – out-of-town secondments and projects
(section CW 16B)
15. When an employee needs to work at a new work location that is not within reasonable
daily travelling distance of their residence, employer-provided accommodation will be
exempt from tax if:
there is a reasonable expectation that the employee’s secondment to that work
location will be for a period of two years or less, in which case the payment will
be exempt for up to two years (discussed from [19]); or
the employee’s move is to work on a project of limited duration the principal
purpose of which is the creation, enhancement or demolition of a capital asset
and the employee’s involvement in that project is expected to be for three years
or less; in which case, the payment will be exempt for up to three years
(discussed from [22]); or
9
Section CW 16B.
10
Section CW 16F.
11
Section CW 16D.
12
Section CW 16B(2).
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the move is to work on Canterbury earthquake recovery projects; however, due
to the passage of time since the Canterbury 2011 earthquake, this exception is
now of limited application.
Definitions – residence and reasonable daily travelling distance
16. For any of the exemptions to apply, the employee must travel from their residence to a
workplace and the workplace must be outside the reasonable daily travelling distance.
17. “Residence” is not defined in the Act, but the Commissioner considers that “residence”
refers to the employee’s home immediately before the change in location and the
distance test is assessed with reference to that residence and the travelling distance
between that residence and the work location.
18. The Commissioner’s position on what she considers to be “reasonable daily travelling
distance” was published in “Guidance on a ‘reasonable daily travelling distance’
”, Tax
Information Bulletin Vol 21, No 9 (December 2009): 6. This guidance is also applicable
to the accommodation exemptions.
Reasonable expectation that the secondment will be for two years or less
19. Where a reasonable expectation exists that the employee’s secondment to a workplace
that is not within a reasonable daily travelling distance will be for a period of two years
or less, the accommodation will generally be exempt from tax for the length of the
secondment. This is illustrated in Example 2 below.
20. Reasonable expectation is considered at the time the secondment is entered into -
how long each party expected the secondment to last when it started. Things that may
be taken into account in terms of forming that expectation include the employee’s
terms of employment or whether the expectation is captured in a written employment
agreement or in some other way (for example, by way of communication between the
parties). This is illustrated in Example 2.
21. The expectation could also be captured in other documents such as board minutes,
planning documents, and correspondence with the third party for whom the employer
is carrying out the project.
Example 2
Tahi lives in Auckland and is seconded to a job in Wellington for 12 months.
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other documentation clearly demonstrate how long the parties expect the
secondment to be.
As the secondment is for two years or less (in this case, 12 months) any
Example 3
Liam lives and works in Auckland. He is an accountant who has worked for his
employer for 10 years. The employer sends Liam to New Plymouth for three
months to audit a large client. Liam pays for his stay in a hotel in New Plymouth,
and his employer fully reimburses him for this cost.
As Liam’s employer expects him to work in New Plymouth for a period two years
or less, the payment that Liam receives as reimbursement for his accommodation
Accommodation linked to long-term projects of limited duration
22. When an employee is required to work at a distant workplace in relation to a long-
term project of limited duration, employer-provided accommodation can be exempt
where a reasonable expectation exists that the employee will be working at a distant
workplace on that project for a period of three years or less.
23. This period takes into account certain business practices, particularly in the
construction industry. For example, employees might be housed at or near a
construction site, might share accommodation, or might be employed on a “fly in, fly
out” basis, so would not be relocating. Employees may be recruited from overseas
with no intention that they ever relocate permanently to New Zealand.
24. Projects covered by this exemption are not limited to the construction industry, but
may involve, for example, upgrades of existing infrastructure or information technology
development and implementation.
25. The three-year period is the time the employee is involved in the project, not the
length of the project itself (which may be longer). The reasonable expectation needs to
exist when the employee commences work on the project.
26. The project must satisfy the following requirements:
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The project’s main aim must be the creation of a capital asset, whether a new
asset, a replacement of an existing asset, an upgrade, or refurbishment;
The employee must be engaged exclusively on project work (bar incidental
activities); and
The project must involve work for a client that is not associated with the
employer (the associated party rules in sections YB 1 to YB 16 apply).
Example 4
Helio is seconded by his employer to oversee project management on the initial
stages of a dam construction project carried out by a client in a remote area of
the North Island. Because of the scale of the project, the number of workers and
the remoteness of the location, Helio’s employer sets up an accommodation
facility to house its employees working on the project, including Helio. The entire
project is expected to take around seven years to complete, however Helio is only
involved in the preliminary work. Both Helio and his employer expect Helio to
work on the project for the first two and a half years.
Helio is working on a project involving the construction of a capital asset. Both
he and his employer expect him to be working at the distant work location for
three years or less. Therefore, the value of the accommodation provided to Helio
Exemption for out-of-town secondments and long-term projects can cease to
apply if circumstances change
27. Even if the employer-provided accommodation meets the requirements to be
considered exempt, the accommodation can cease to be exempt if circumstances
change. The accommodation will cease to be exempt if:
the employer pays part of or all the costs associated with buying the employee a
house in or near the new work location;
the employee’s involvement in the secondment or project comes to an end; or
the expectation that the employee will only be at the new location for a
maximum of two years or three years (whichever applies) changes so that the
employee is reasonably expected that they will be at the distant workplace for
longer.
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28. From the point in time that the circumstances change as outlined above, any
employer-provided accommodation will be taxable, but accommodation provided
before that time will remain exempt. This is illustrated in Example 5:
Example 5
Fatima works for an employer in Auckland. Her employer sends her to work in
Hamilton for an expected 18-month period. After four months, Fatima decides
she wants to relocate permanently to Hamilton. Her employer agrees to make
the job in Hamilton permanent and to pay Fatima an accommodation allowance
for the first six months after her arrival in Hamilton.
For the first four months, the employer reasonably expected that Fatima would
not be working in Hamilton for more than two years. Therefore, the payments to
cover Fatima’s accommodation for those first four months are exempt under the
two-year rule. But now that Fatima is expected to be working in Hamilton for
more than two years, any payments to cover her accommodation after the initial
Expected period initially exceeds the time limit but subsequently reduces
29. If a secondment is initially expected to exceed the relevant two or three-year period, it
will be subject to tax.
30. However, if this expectation changes and the total period will be less than the relevant
time limit (two or three years as relevant), the employer-provided accommodation
becomes exempt from the date the expectation changes. The employer-provided
accommodation up to the date the expectation changes remains taxable – there is no
retrospective exemption following the change in expectation. This is illustrated in
Example 6.
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Example 6
Raj lives in Napier. His employer sends him to Tauranga to set up and manage a
new office. The initial expectation is that Raj will be in Tauranga for four years.
Raj’s employer provides him with accommodation in Tauranga. As the
secondment is expected to be more than two years the accommodation will be
taxable.
One year into the secondment, Raj’s employer decides Raj only needs to stay in
Tauranga for another six months as the company has found someone based
locally to run the office on a permanent basis. As the expectation of the total
secondment duration is now less than two years (18 months), the final six months
of the accommodation provided to Raj are exempt from tax. The accommodation
provided for the first 12 months, before the change in expectation, remains
New employees and out-of-town secondments and long-term projects
31. The exemptions described above for employer-provided accommodation generally
apply in relation to existing employees. However, they can apply to new employees in
specific instances.
32. New employees only qualify for the two-year exemption for secondments when:
the employee is newly recruited to work at a particular work location but is then
temporarily sent to work at another work location (for example, an individual is
recruited to work in Auckland but before starting in Auckland is sent to work in
Dunedin for a month before returning to Auckland); or
an employee working for one employer is seconded to work for another
employer on a temporary basis, with the expectation that the employee will
return to work for the original employer (for example, an individual working for
an Australian accountancy firm is sent to work for an affiliated New Zealand firm
in Auckland for 18 months).
33. New employees qualify for the three-year exemption for work on a project of limited
duration subject to the same conditions as existing employees.
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Exceptional circumstances – extended exemption period
34. In exceptional circumstances, employer-provided accommodation can continue to be
treated as exempt even though the employee continues to work at the distant
workplace for longer than the two or three-year period in the exemption.
35. “Exceptional circumstances” are confined to those that are outside the control of the
employer and employee, such as a natural disaster or medical emergency, with the
result that the employee must stay at the work location. The employer-provided
accommodation can continue to be treated as exempt for as long as the exceptional
circumstance means the employee is unable to leave the work location.
Restarting the time period
36. For the purpose of determining whether a time limit for the exemption for
secondments or projects applies, a break in a period of continuous work at a distant
workplace may result in a restart of the time period. However, the break will be
ignored if a reason that is more than incidental for the cessation of the employment or
service at that location is to allow a further period of exemption.
13
Relationship with the relocation payments rule
37. If an employee is not eligible for the above out-of-town secondments and projects
exemption, they may still qualify for the accommodation exemption for up to three
months after their arrival, under section CW 17B (tax-exempt relocation payments).
38. For a list of relocation expenses that are eligible under section CW 17B, see
Determination Det 09/04
– Eligible relocation expenses (Inland Revenue, 2009).
Relocation expenses include such things as the cost of removal and transport of
household effects.
Employer-provided accommodation – ongoing multiple workplaces
Multiple workplace exemption
39. An employee may be required to work at more than one workplace on an ongoing
basis. When this occurs, employer-provided accommodation that they receive in
relation to working at a distant workplace (one outside a reasonable daily travelling
13
Section CW16C(6).
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distance) is exempt from tax, without an upper time limit.
14
This is illustrated in
Example 7.
40. The multiple workplace rule can also apply when an employee is sent on a short-term
business trip to another location. This is illustrated in Example 8.
41. In these circumstances, the employee will continue to have ongoing duties at their
usual place of work while they are working at the distant work location during the
business trip.
Example 7
Lucia manages two offices, one in Christchurch and one in Dunedin. She works in
Christchurch two days a week and in Dunedin for three days a week. Her home is
in Dunedin.
Lucia has more than one ongoing work location. When she works in
Christchurch, she is beyond reasonable daily travelling distance from her home in
Dunedin. An accommodation payment to cover her hotel costs when staying in
Christchurch is exempt under the multiple workplace rule. Therefore, the
Example 8
Carmen is chief executive of a large group of companies based in Auckland. The
group has offices in several cities across New Zealand. Each month Carmen visits
one of these offices as part of her management duties. Typically, these visits last
up to a week, and Carmen’s employer arranges and pays for her accommodation
at a nearby hotel.
When Carmen is visiting the offices away from Auckland, she has more than one
ongoing workplace for the duration of her visit. Therefore, the cost of her
accommodation while working at those offices is exempt under the multiple
14
See section CW 16F.
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Multiple workplace exemption does not apply to a home office
42. The multiple workplace exemption does not apply when the employee has two
workplaces and one of those workplaces is a home office.
15
Any accommodation
provided to such an employee by their employer is taxable.
Employee-provided accommodation – meetings, conferences and
training courses
43. When an employee needs to attend a work-related meeting, conference or training
course that requires at least an overnight stay, any employer-provided accommodation
is exempt from tax without an upper time limit.
16
44. While the need for accommodation would usually arise because the work-related
meeting, conference or training course is beyond reasonable daily travelling distance
from the employee’s home, this need not be the case. Some courses may be held
locally but may require employees to stay overnight for reasons such as networking
and team building.
45. This exemption covers both local and distant accommodation situations. The
definition of “period of continuous work” includes a period that the employee is
required to stay in a location that is not distant from the employee’s regular
workplace.
17
46. If a stopover is required in travelling to or from the location, accommodation at that
stopover is also exempt.
47. Flowchart 2 summarises the above and assists in determining whether accommodation
is exempt:
15
Section CW 16F.
16
Section CW 16D.
17
Section CW 16D(4).
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Flowchart 2: Determining whether the accommodation is exempt
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Part 2: What is the value of the accommodation
subject to tax?
48. If accommodation is taxable, the next step is to determine the value (often referred to
as the taxable value).
What are the general valuation rules?
Value where the employer physically provides employee
accommodation
49. Where an employer physically provides employee accommodation the value of that
accommodation is the market rental value.
50. The Commissioner broadly considers that market rental value refers to the amount that
would be arrived at by two non-associated parties, on an arm’s length basis, for the
rental of the accommodation.
51. For guidance on estimating the likely market rental value of employer-provided
accommodation, see Commissioner’s Statement CS 16/02
: Determining “market rental
value” of employer-provided accommodation (Inland Revenue, 2016), and with
reference to employees of boarding schools: Commissioner’s Statement CS
18/01:
Determining "market rental value" of employer-provided accommodation - Boarding
Schools (Inland Revenue, 2018).
Value for accommodation allowance or payment of accommodation
expenditure
52. Where an accommodation allowance or accommodation expenditure is paid by the
employer (whether directly or by reimbursement to the employee), the market value is
the amount paid. This amount may be varied by the adjustments discussed from [54].
53. Some providers of accommodation services (such as hotels, managed apartments, and
short stay accommodation providers) offer accommodation to their clients in addition
to other services that do not fall within the definition of accommodation under the
Income Tax Act 2007. These additional services may include, for example, wireless
internet access. The cost of these additional services are sometimes, but not always,
itemised separately from the accommodation provided when the recipient is billed.
Where the cost of these additional services are not separated out from the cost of the
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accommodation provided by the service provider, the Commissioner takes a pragmatic
approach and would treat the benefit received from these additional services as part of
the accommodation received.
18
Adjustments to the taxable amount
54. Once the market value has been determined, several factors may result in adjustments
being made before the taxable amount is determined:
Rent paid by the employee: If an employee pays rent on the accommodation
provided, the amount of rent paid should be subtracted from the market value to
determine the taxable value. (See [55].)
Business or work use: Where a portion of the premises is used for work by the
employee (for the employer that provides the accommodation), a pro-rated
adjustment may be made to reflect that. The taxable value will be the portion of
the premises used by the employee for accommodation only. (See from [56].)
Shared accommodation: An adjustment is allowed when two or more employees
share accommodation. (See from [58].)
Overseas accommodation: The taxable value of employer-funded
accommodation provided to employees as part of an overseas posting is capped
at the average or median rental value for accommodation in the vicinity where
the employee would have lived if in New Zealand.
19
This cap, which is of
significance to employees who remain tax resident in New Zealand, recognises
that the market rental value of accommodation in overseas locations can be
disproportionately high compared with the value of accommodation that an
employee might occupy if working in New Zealand (see from [60]).
Ministers of religion: A specific valuation rule applies to accommodation supplied
by religious bodies to their ministers (see from [67]).
20
18
For clarity – where the costs of non-accommodation services are itemised separately from the cost
of accommodation provided, the tax treatment of the non-accommodation services must be
considered on their own facts.
19
Section CE 1C.
20
Section CE 1E. Section CE 1D also provides rules for calculating the market value of
accommodation where accommodation is physically provided by the New Zealand Defence Force, but
this will not be covered in any detail in this Statement.
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Rent paid by the employee
55. The taxable value should be reduced by the amount of any rent that the employee
pays for that accommodation. This is illustrated in Example 9.
Example 9
As part of Michael’s salary package, his employer agrees to pay his
accommodation costs in Auckland up to a value of $500 per week. Michael finds
an apartment that he likes, but the weekly rent is $700 per week. His employer
agrees to pay the rent to that value, on the basis that Michael pays the $200
difference to his employer.
The taxable value of the accommodation that Michael receives in this example is
$500 per week, as the $200 per week rent that he pays to his employer is
Work use of accommodation
56. If part of the accommodation provided is used for work purposes, the taxable value is
accordingly reduced on a pro-rata basis. To qualify, a clearly identifiable part of the
accommodation needs to be used “wholly or mainly” for work purposes related to the
employee’s employment (with the employer providing the accommodation). That
portion of the premises does not need to be used solely for work purposes to meet the
“wholly or mainly” test, but it must at least be used predominantly for work purposes
and its primary purpose must be work related.
57. The deduction is determined by apportioning between the business and private use of
the accommodation. This is illustrated in Example 10. Any non-work-related use will
be ignored, if it is temporary, sporadic or otherwise minor (such as using an office for
checking personal emails or a family member occasionally using it for personal
projects).
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Example 10
Miha works as a dental assistant. Her employer provides her with
accommodation that has a market rental of $500 a week. Miha has set up one
bedroom in the property as a workspace to make dental impressions. It is usually
used as a workspace, but it also has a sofa bed. On occasion, when Miha has
house guests, the sofa bed is used as a bed for the guest to sleep.
The use of the space as an occasional sleeping area for guests is ignored as it is
temporary and sporadic – it is wholly or mainly used as a workspace. As the
workspace is one-tenth of the total floor area of the accommodation, $50 is
deducted from the rent paid, with the result that the taxable value is $450 per
Shared accommodation – apportionment of taxable value
58. Generally, when two or more employees share accommodation provided by their
employer, the taxable amount is still the market rental value - the issue is only one of
apportionment between the employees.
59. The amount may be apportioned equally between the employees or, if the employer
and employees agree, apportioned between the employees on a different basis (for
example, based on bedroom size). This is illustrated in Example 11.
Example 11
George and Tana work for a start-up in Wellington. Their employer rents a $400
per week two-bedroom property for them to live in.
Tana manages to pick his bedroom first and chooses the bigger of the two
rooms.
The market rental value of the property is $400 per week. As Tana has a bigger
room than George, they agree with their employer that the value of the
accommodation will be split on a 60:40 basis – the taxable value of the
accommodation received by Tana will therefore be $240 per week, and by George
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Accommodation provided to employees working overseas – exception
to the general rules
60. An exception to the general valuation rules is for accommodation provided to
employees working overseas. This exception allows the use of a New Zealand–
equivalent-based value for the market value rather than the market value of the actual
overseas accommodation provided.
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61. In establishing the value of an equivalent New Zealand property, it is necessary to
consider where the employee would likely be working for the employer at the overseas
location, the equivalent accommodation the person would likely occupy if living in
New Zealand, and the average or median market rental values at or near that
equivalent work area.
62. What is received overseas is only relevant if the rental value of the overseas
accommodation is less than the average or median market rent of the equivalent
New Zealand accommodation. In those circumstances, the value used for tax purposes
is the rental value of the overseas accommodation. This is illustrated in Example 12.
Example 12
Zoe is seconded by her employer to work at its site in Brussels for three years and
is provided with a flat for the duration of her secondment. The rent the employer
pays is equivalent to $50,000 a year. Zoe would work in central Wellington if
working in New Zealand and would be likely to be living in a two-bedroom
apartment with her partner in central Wellington where an average annual rental
value would be $24,000.
The market value of the accommodation Zoe receives is therefore the cost of the
accommodation that she would have had in Wellington, not the value of the
equivalent accommodation in Brussels. As a result she is taxed on an
63. In establishing the comparable New Zealand property, a relevant factor is the number
of family members in the employee's household in the overseas location, their ages
(adults and children) and their living requirements.
64. For example, if an employee has a household of four but goes on secondment
overseas while their family remains behind, their New Zealand equivalent
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The New Zealand equivalent value can also be used for determining the taxable value of an
allowance or amount paid for or towards the provision of the accommodation.
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accommodation will be determined based on what accommodation they would be
likely to occupy as a person living alone. Equally, if their spouse joined them but not
their children, the equivalent accommodation would be the accommodation that they
would be likely to occupy as a couple rather than as a family of four. This is illustrated
in Example 13.
Example 13
Jo is seconded by her employer to Jakarta for three years and is provided with an
apartment in central Jakarta for the duration of her secondment. The rent her
employer pays is equivalent to $25,000 a year. Jo would normally work in central
Wellington if working in New Zealand and live in a five-bedroom house in Tawa
with her adult children.
Jo’s children are settled at university and value their independence, so as a family
they decide that Jo will go to Jakarta by herself, while her adult children will
remain behind and maintain the house in Tawa.
Therefore, Jo only needs a small apartment in Jakarta as she will be the only
occupant. As a result, the market value of the accommodation Jo receives is the
equivalent of a small apartment close to central Wellington.
The cost of the equivalent apartment in Wellington would cost $35,000 a year. As
this value is more than the value of the accommodation she is receiving in
Jakarta, the taxable amount is the value of the Jakarta accommodation – $25,000
65. If the employee’s role in New Zealand can be performed in more than one location in
New Zealand, an average of the multiple locations can be used to determine the New
Zealand equivalent accommodation. If the employee’s role in New Zealand can be
performed anywhere in New Zealand, a New Zealand wide valuation can be used.
Either the average or the median market rental value for the whole of New Zealand can
be used. This is illustrated in Example 14.
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Example 14
Anahera works as a software developer for a company based in Auckland and
Wellington. Four months ago, her employer agreed for her to move from
Wellington to Katikati to trial working remotely. Following a successful trial, her
employer agrees that Anahera’s position can be performed from anywhere in
New Zealand.
Anahera then secures a two-year secondment to work for the company’s new
office in Reykjavik, Iceland. Due to differences in time zones, this work requires
her to be permanently based in Reykjavik.
As part of her secondment, Anahera receives accommodation for her and her two
children, who will join her in Reykjavik, to the value of $50,000 per year.
To calculate the New Zealand equivalent, the average cost of accommodation in
New Zealand as a whole is used, because Anahera’s role in New Zealand can be
performed anywhere in New Zealand. This would be approximately $26,000 per
year for Anahera and her two children. This is less than the amount she receives
from her employer for accommodation in Reykjavik. As a result, the amount that
the equivalent accommodation would cost her in New Zealand ($26,000 per year)
66. There are a range of sources available to help determine average or median market
rental values. For example, the Tenancy Services website, which provides market rental
statistics: https://www.tenancy.govt.nz/rent-bond-and-bills/
.
Accommodation provided by religious bodies to ministers of religion
67. The value of accommodation supplied to ministers of religion is determined under
section CE 1E.
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A long-standing administrative practice had previously capped the
value of church-supplied accommodation at 10% of a minister’s stipend. This practice
was incorporated into the legislation with effect from 1 April 2015.
68. A “minister of religion” is defined in the Act as a person:
who is ordained, commissioned, appointed, or otherwise holds an office or
position, regardless of their title or designation, as a minister of a religious
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This specific valuation rule only applies to accommodation physically provided by the church. In all
cases (for example, an accommodation allowances or reimbursement) the general valuation rules
apply.
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denomination or community that meets the charitable purpose of the
advancement of religion;
whose duties are related mainly to the practice, study, teaching, or advancement
of religious beliefs; and
whose accommodation is used as an integral part of performing their duties.
69. The requirement that a minister’s church-provided accommodation is used as an
integral part of performing the minister’s duties will be met as long as there is an
expectation underlying a minister’s pastoral duties that some church members might
visit their home, irrespective of whether any visits happen in practice. Therefore,
ministers do not need to record whether visits happen to satisfy this requirement.
70. The amount of income arising to a minister from accommodation provided to them is
calculated using the following formula:
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remuneration × (1 – adjustment) + excess rental
Where:
remuneration is 10% of the remuneration that the minister receives from the religious
society or organisation for the income year for the performance of their duties as a
minister
adjustment is the value of the accommodation that is apportioned to work-related use,
expressed as a decimal fraction of the total value of the accommodation. To be eligible
for apportionment, the minister needs to use the relevant part of the accommodation
wholly or mainly for work purposes. For example, if the minister uses 10% of the
accommodation wholly or mainly for work purposes, the value of the adjustment would
be (1 - 0.1) = 0.9. If more than one minister of religion lives in the accommodation, the
adjustment is apportioned equally between them
excess rental is the difference between the received accommodation’s market rental
value and the market rental value of accommodation that is reasonably commensurate
with the duties of the person as a minister and for the location in which they perform
their duties. The amount of excess rental cannot be less than zero for the purpose of the
calculation.
This is illustrated in Example 15.
71. However, no adjustment is allowed simply because ministers of religion share
accommodation. The value of the employer-provided accommodation is calculated
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Section CE 1E(2).
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with reference to the employee (or employees) who receives the accommodation as
part of their work.
72. If the accommodation is provided for only part of the year, the calculations of the value
are with reference to that part of the year.
Example 15
Anareia is an ordained parish priest for the Anglican Church. She serves her
parish in the East Cape region. Along with of her stipend of $60,000 per year, the
church provides her with accommodation in a three-bedroom house in Ruatoria.
Anareia uses one large bedroom as an office to meet with visiting parishioners.
The value of the room (based on floor area) is about 15 percent of the total value
of the property.
The value of the accommodation provided to Anareia is $16,000 per year. This is
commensurate with her duties as minister and for the location where she is
based. As a result, the “excess rental” for the purposes of calculating the value of
the accommodation received is nil.
The value of her accommodation received is therefore:
73. This exemption does not apply to an accommodation allowance or reimbursement
received by a minister of religion. The ordinary rules for calculating the value of an
accommodation allowance or reimbursement apply.
74. It is important to note that the definition of “minister of religion” specifically excludes a
member of a religious society or order referred to in section CW 25. Section CW 25
provides for an exemption for board and lodging provided to members of religious
societies and orders whose sole occupation is service in a society or order and who are
not paid for their service. This exclusion does not apply to a minister of religion who
receives a stipend (and is therefore paid) for their service.
Tony Munt
National Advisor, Technical Standards
Date of issue: 10 June 2021