It sounds like they are trying to hide the benefit they get from the rental property. I'd be very wary of doing anything like that. I'd also be wary of working for something that isn't declared. If you think about the value if the undeclared income in the form of free rent - you're looking at a significant benefit that may come back and bite you on the backside later.

Imagine this example - you are paying 250 a week in rent - over the course of the year, if he works for "free rent", that's 13k that you don't pay tax on. 13k that isn't declared for FTB purposes. Now taking into account the ATO can investigate going back seven years - someone makes a boo boo - you guys, them, an accountant - and the whole situation gets investigated. It comes to light after seven years that you've had this undeclared income. ATO decides to up his income, which ripples to fao for centrelink purposes and they also raise a debt...

It's something you really need to be aware of the ins and outs. If it is set up as a fringe benefit for employment and is done correctly, you can still come out ahead in taxable income and it may be worth it. But I would be making sure you check with an accountant that anything you are doing is above board and can't get your guys in trouble