The IRD have recently reviewed the mileage rate used to calculate motor vehicle expenses incurred in  businesses.   The mileage rate has gone down from 74 cents to 72 cents per km for both petrol and diesel vehicles for the 2016 year onwards.  This, the IRD says, is a reflection of the lower fuel costs and lower overall running costs for vehicles. 

What this means for you:

Self-Employed

Self-employed taxpayers can use the new 72 cents per km rate to calculate their vehicle costs up to 5,000km a year.  This is instead of claiming a portion of your actual vehicle costs based on a log book of business use vs. personal use for the vehicle. 

If a self-employed person travels over 5,000 km each year then they must use either actual expenditure or the log book method to calculate their vehicle costs.

What if I have already filed my 2016 return using the old rate?

No problem - For self-employed who have already filed their 2016 tax returns and utilised the old mileage rate, the Commissioner does not propose amending these returns to the new rate. 

Reimbursing Employees

The new 72 cents per km mileage rate can be used to reimburse staff for work related travel undertaken in their own vehicle.  Alternatively, you can use another reputable source such as the AA mileage rates to calculate your employees reimbursement. 

What if I have been reimbursing my staff using the old rate?

No problem - IRD accept that as the rate was not issued until after the end of the 2016 year, they will not expect you to go back and recoup the expense from your employees and will accept that deduction in your tax returns at the old rate.  Going forward however, the new rate should be used.