Income tax: is a 'housing allowance subsidy' paid to an employee in respect of the employee's principal residence assessable under the Income Tax Assessment Act 1936 (ITAA)?

Yes. An amount paid to an employee as a housing allowance subsidy (as described below) is considered to be an allowance given in respect of employment or services rendered and is assessable to the employee under subsection 26(e) of the ITAA.

Some remuneration packages provide for the payment of a housing allowance subsidy where the employee owns a home. The subsidy is not intended to be a payment or reimbursement of any particular expense of home purchase or ownership incurred by the employee. The subsidy is merely intended to maintain equitable remuneration between employees who own their homes and those whose rental of private accommodation is paid or reimbursed by the employer.

Because the payment is not intended to reimburse a particular expense of home purchase or ownership, a housing allowance subsidy paid in these circumstances is not a fringe benefit as defined in the Fringe Benefits Tax Assessment Act 1986 but is assessable income of the employee. Note: Where rental of private accommodation is paid or reimbursed by the employer or where a payment by the employer is intended to reimburse a particular expense of home purchase or ownership, the payment would be considered to be a fringe benefit as defined in the Fringe Benefits Tax Assessment Act 1986.