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Employer responsibilities Ngā kaiwhakawhiwhi mahi takohanga

How to tax a benefit allowance


Benefit allowances are provided in addition to salary or wages that benefit the employee. Examples include:

  • food allowances
  • clothing allowances
  • accommodation allowances
  • farm or cottage board.

What is the taxable value of the allowance

The taxable value of the allowance is the difference between:

  • the market value of the allowance provided, and
  • any amount the employee actually pays.

An exception to this is if the allowance is tax exempt.

Find out more about exempt allowances


If you are providing free board you need to take into account what is being supplied when calculating the taxable value. For example meals, own room, power and phone.

How it is taxed

The taxable value of the allowance is added to the employee's wages each pay period it's paid or provided. PAYE is then deducted from the total. Include this in the gross earnings when you complete your Employer monthly schedule (IR348) or Employment information schedule.


Regan works on a farm with a farm house on the property. His employer lets him rent the farm house for less than the market value. Regan will have to connect and pay for any of his own utilities, eg, power, phone, internet, etc.

Market value of accommodation $150 per week
Rent paid by Regan $100 per week
Taxable value (to be added to wages and taxed) $50 per week

If Regan is paid a weekly rate of $500 each week, the calculation is:

Weekly gross $500
Taxable value of accommodation $50
Total gross $550
PAYE on $550 $85.37
Regan would be paid the following:
Weekly gross $550
Less taxable value of the accommodation $50
less PAYE $85.37
Net amount paid to the employee $414.63

When completing your Employer monthly schedule (IR348) or Employment information schedule, Regan's gross will be listed as $550 (inclusive of the taxable value of the accommodation).



In the above calculation any child support or student loan deductions would be assessed on the gross amount of $550. KiwiSaver would be calculated on the gross of $500 as KiwiSaver isn't calculated on accommodation allowance.

Find out more about KiwiSaver for employers

Find out more about benefit allowances (accommodation, food and clothing)

Find out more about the changes to benefit allowances in the Special report on employee allowances on our Tax Policy website