Thanks a lot, Now I get it, I couldn't understand earlier because it's been couched in law terminology.The way I read it:
(I'm going to use numbers here because it's too complicated to describe.)
Salary = $1000
10% of salary = $100
Rent allowance = $150
Actual rent = $200
The actual rent is $100 more than 10% of your salary, so you don't have to pay tax on the first $100 of the rent allowance -- only on the remaining $50. If the excess were more than $500 (half of your salary), however, only the first $500 would be tax-free.