Calculating PAYE on an accommodation benefit involves determining the value of the accommodation provided by the employer and applying the appropriate tax rate.

This is based on a formula and the remuneration earned by the employee and is only the lower of the formula or actual costs to employer if obtained at arms length transaction with unconnected person – or actual costs if it is holiday accommodation”

Seventh Schedule Paragraph 9(3)

The taxable value of the accommodation is calcualted with a formula. The forumla is: (A-B) x (C/100) x (D/12)

(3) Subject to the provisions of subparagraph (3C) and (4), the taxable value to be placed on such accommodation for any year of assessment shall be an amount determined in accordance with the formula: (A-B) x (C/100) x (D/12)
in which formula—
(i) “A” represents the remuneration proxy as determined in relation to the year of assessment;
(ii) “B” represents an abatement equal to an amount of R83 100: Provided that in any case where—
(aa) the employer is a private company and the employee or his spouse controls the company or is one of the persons controlling the company, whether control is exercised directly as a shareholder in the company or as a shareholder in any other company; or
(bb) the employee, his spouse or minor child has a right of option or pre-emption granted by the employer or by any other person by arrangement with the employer or any associated institution in relation to the employer whereby the employee, his spouse or minor child may become the owner of the accommodation, whether directly or indirectly by virtue of a controlling interest in a company or otherwise,
the said abatement shall be reduced to zero;

(iii) “C” represents a quantity of 17: Provided that where the accommodation consists of a house, flat or apartment consisting of at least four rooms—
(aa) “C” represents a quantity of 18 if—
(A) such accommodation is unfurnished and power or fuel is supplied by the employer; or
(B) such accommodation is furnished but power or fuel is not supplied; or
(bb) “C” represents a quantity of 19 if such accommodation is furnished and power or fuel is supplied by the employer; and
(iv) “D” represents the number of months in relation to a year of assessment during which the employee was entitled to occupation of such accommodation.

Therefore, in terms of the definition of remuneration proxy no deductions can be made, it is therefore “remuneration” as defined in the Fourth Schedule.

Furthermore, it depends on the employment date of the employee:
• If employee was not employed in the previous year, it is this year’s remuneration grossing up in relation to the pay periods in tax year and pay periods worked.
• If the employee was employed for the full previous tax year, it is the remuneration received for that year.
• If the employee was employed for a portion of the previous tax year, it is the remuneration received during that portion which must be gross-up in relation to the full year.