Accounting for allowances and benefits for staff: Allowances
Benefit allowances
Employers may pay "benefit allowances" to employees. These are taxable allowances.
Definition
Benefit allowances are payments made in addition to salary or wages that benefit the employee. Examples include:
- food
- accommodation
- farm or cottage board.
What is the taxable benefit?
The taxable benefit is the difference between the market value of the benefit provided, and any amount the employee actually pays.
How is a benefit allowance taxed?
It is taxed with the employee's wages in the pay period it is paid in.
The taxable value of the benefit (ie, 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. Include this in the gross earnings when you complete your Employer monthly schedule (IR348).
| Note | |
|---|---|
| To calculate the value of free board you need to take into account what is being supplied, for example, meals, own room, power and phone. | |
| Example | ||
|---|---|---|
| Regan works in a shop with accomodation above. His employer lets him rent the accommodation for less than the market value. | ||
| Market value of accommodation | $200 per week | |
| Less rent paid | $120 per week | |
| Taxable value (to be added to wages and taxed) | $80 per week | |
Date published: 18 Jan 2007
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