Be aware of new rules on houses

South Waikato News - - RURAL DELIVERY / NGA¯ KO¯RERO TAIWHENUA - By JOHN BROS­NAN

A farm job of­ten comes with a farm house and the amount the farm worker pays for the ac­com­mo­da­tion is the PAYE on the rent al­lowance, the rent al­lowance be­ing part of his over­all salary pack­age.

For ex­am­ple as a farmerem­ployer you may cur­rently rent your three- bed­room worker ac­com­mo­da­tion to your em­ployee for $100pw. The $ 100pw is the rent al­lowance which the em­ployee will pay PAYE on. Typ­i­cally over the last few years the rent al­lowance has been be­tween $80 and $100pw.

How­ever this needs to be re­vis­ited as the In­land Rev­enue (IRD) are look­ing at this area in re­la­tion to Fringe Ben­e­fit Tax (FBT), which cre­ates is­sues for farm em­ploy­ers.

So with our ex­am­ple above if the prop­erty ac­tu­ally had an as­sessed mar­ket rental value of $300pw the IRD will look at this as a fringe ben­e­fit to the value of $200pw to the em­ployee.

At a sin­gle FBT rate of 49.25 per cent the em­ployer po­ten­tially now has FBT of $ 5,122.00 per an­num to pay. This is just an ex­am­ple and FBT rates vary along with the em­ployee’s in­come and PAYE rates but the point is that the rental of the farm prop­erty must now be in line with mar­ket rates.

With this drive to have prop­er­ties at mar­ket rates, many em­ploy­ment agree­ments signed this sea­son have a higher rental al­lowance to re­flect the new rental amount. That is quite straight for­ward with new em­ploy­ees, but bring­ing ex­ist­ing em­ploy­ees rents and rental al­lowances in line with cur­rent mar­ket rates is a lit­tle more in­volved as the salary will also need in­creas­ing to off­set the in­creased PAYE and al­low the em­ployee to main­tain the same net pay­ment.

If you have any ques­tions or con­cerns around this or any other em­ploy­ment is­sue then give me a call at Coop­erAitken Ac­coun­tants.

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