The tax benefit of a housing allowance

JOHAN NEL - A common trend in the job market is to award employees a housing benefit. This assists employees to afford the cost of housing. A tax benefit may be available to the employees who receive this allowance. It is important to note that this tax benefit is only available to employees where the employer has a registered housing scheme.

The one-third tax deduction is applicable where:

• the employer provides employees with free housing

• an employee leases residential accommodation, the employer may pay an allowance limited to the actual rental agreement

• an employee owns his/her own residence, the employer may pay an allowance limited to the actual bond instalments

• the employee receives subsidised housing from the employer.

Before application of the housing scheme tax benefit by the employer, it is recommended that the following is confirmed by all employees who will benefit:

• Verification of the amount payable with the employee’s rental or bond agreement;

• Combined housing allowances of an employee and his/her spouse should not exceed the amount payable per agreement;

• Housing allowances shall be limited to one such agreement per employee; and

• The allowance will only be applicable to the employee’s primary home. Therefore, an employee that is based in Windhoek cannot claim a housing allowance on his/her holiday home in Swakopmund.

It should be noted that employers can still provide employees with housing benefits even though the above criteria is not met. However, the tax benefit would not be available on these housing benefits where no registered housing scheme is in place.