• 10.5 Taxable value of a housing fringe benefit provided in Australia

    This category of benefit does not include accommodation provided in a remote area of Australia. Remote area housing benefits are exempt from FBT (refer to section 10.8).

    There are two sub-categories of these benefits for valuation purposes, namely:

    1. where the person providing the accommodation is carrying on a business of providing the same accommodation to the public and the unit of accommodation is a caravan or mobile home, or is in a hotel, motel, hostel or guesthouse
    2. any other accommodation.

    Accommodation in a caravan, mobile home, hotel, motel, hostel or guesthouse where the person providing the benefit is carrying on a business of providing such accommodation to the public

    The taxable value of the right to use a unit of accommodation - that is a caravan or mobile home, or is in a hotel, motel, hostel or guesthouse - is the market rental value of the accommodation, reduced by any rental payments made by the employee. The market rental value must be calculated by reference to the period during the FBT year when the employee had the right to use the accommodation.

    If the accommodation is provided to an employee of the hotel, caravan park, etc, and is identical or similar to that provided to paying guests, the taxable value is 75% of the market rental value, less the amount of any rental payments.

    For example, consider an employee who manages a caravan park. If the employee lives rent-free in a house in the caravan park, the taxable value is the market rental value of that house. However, if the employee's accommodation is in a mobile home and the caravan park has other similar mobile homes that are let to customers, the taxable value is 75% of the market rental value of the mobile home.

    In determining the market rental value in these cases, it is not appropriate to use the daily rate charged to casual guests. Rather, you need to establish an appropriate long-stay occupancy rate. One acceptable measure is to determine the market rental value by reference to rentals charged for equivalent accommodation in the nearest residential quarter (for example, the rent charged for a similar apartment). As an alternative, you could adopt an amount equal to 15% of the daily rate charged to casual guests.

    Other accommodation

    The taxable value of accommodation other than that described above is the market rental value of the accommodation, reduced by any rental payments made by the employee. You must calculate the market rental value by reference to the period during the FBT year when the employee had the right to use the accommodation.

    As an alternative to establishing the market rental value every year, you may base the taxable value for the second and subsequent years on the first year's market rental value. This requires calculating an annual rental value for the first year and thereafter applying an inflation factor. The inflation factor can be obtained from the rent sub-group of the national consumer price index, and is published each year by the ATO. You can use this alternative method for a maximum of nine consecutive years.

    If an employee occupies the accommodation for only part of a year, you have to 'annualise' the market rental value before applying the inflation factor.

    Example: Single employee occupying house

    An employee occupies a house for 121 days of the year.

    If the market rental value for that period is $2,000, the annualised market rental value is:

    $2,000 / 121 x 365 = $6,033.05

    Example: Several employees occupying house

    An employee occupied a house owned by the employer from 1 July 2007 to 31 March 2008 (that is, 275 days). The market rental value of the house for that period was $8,640. The house is located in New South Wales.

    Another employee occupied the house from 1 January 2009 to 31 March 2009 (that is, 90 days). The indexation factor for the state of New South Wales for the year ended 31 March 2009 was 1.045.

    A third employee occupies the house from 1 August 2009 to 31 March 2010 (that is, 243 days). The indexation factor for New South Wales for the year ended 31 March 2010 is 1.072.

    The house was left vacant except for the periods described above.

    No rental payment was made by any of the employees.

    The taxable value of the benefit provided to the first employee (in the 2008 FBT year) was $8,640.

    The taxable value of the benefit provided to the second employee (in the 2009 FBT year) was $2,962.97. This was determined using the following steps:

     

    Step

    Action

    Result

    1

    Obtain the annual rental value equivalent of the accommodation provided in the first year.

    $11,499.05 (that is, $8,640 x 366/275)

    2

    Determine the indexed rental value for the 2009 year.

    $11,499.05 x 1.045 = $12,016.50

    3

    Determine the taxable value of the accommodation provided to the employee according to the period of occupancy.

    90/365 x $12,016.50 = $2,962.97

     

    The taxable value of the benefit provided to the third employee (in the 2010 FBT year) was $8,576.02. This was determined using the following steps.

     

    Step

    Action

    Result

    1

    Index the previous year's (that is, 2009) annual rental value by the published indexation factor.

    $12,016.50 x 1.072 = $12,881.68

    2

    Determine the taxable value of the accommodation provided to the employee according to the period of occupancy.

    243/365 x $12,881.68 = $8,576.02

     

    End of example
    Attention

    Where the year is a leap year, the period of occupancy is divided by 366.

    End of attention

    Where substantial improvements to the particular unit of accommodation could be expected to have increased the market rental value by at least 10%, you must determine the value of the housing benefit by reference to the 'new' market rental value. You also have to find a 'new' market rental value if alterations reduce the market rental value by at least 10%.

    If the accommodation was occupied at different times during the first year by different employees, and the market rental values differed, the annual rental value for indexation purposes is the weighted average of the annual equivalent of the market rental value of each employee's period of occupancy.

      Last modified: 15 Oct 2013QC 17824