By Shelley-ann Brinkley – 6 May 2016

The IRD’s mileage rate has been reduced to 72 cents (down from 74 cents) effective from the 2016 income year onwards.

In line with the Commissioner’s obligation to review the mileage rate on an annual basis, the Commissioner has announced the result of the review for the 2016 income year for persons whose business travel is 5,000 or less in an income year.

The review resulted in the mileage rate being reduced to 72 cents (from 74 cents for 2016) per kilometre for both petrol and diesel fuel vehicles.

The reduction in the rate is largely due to lower average fuel costs during the 2016 income year compared to the 2015 income year and to some extent more efficient motor vehicles.

The Commissioner does not intend to amend tax returns for taxpayers who have already filed their 2016 returns using the 2015 mileage rate.

Taxpayers can choose to use the Commissioner’s mileage rate or use actual costs if they consider that the Commissioner’s mileage rate does not reflect their true costs. Sufficient records need to be kept to support actual costs claimed.

Employers can choose to use the 2016 vehicle mileage rate as a reasonable estimate of costs when they reimburse employees for the use of their private vehicle for business related travel post 1 April 2016.  Employers can also choose to use an alternative estimate from a reputable source such as the NZ Automobile Association.

The mileage rate does not apply to motor cycles, hybrid and/or electric motor vehicles on the basis that these modes of transport are not commonly used for business purposes.

If a self-employed person uses these forms of transport for business purposes they will need to calculate their actual expenditure or in the situation of an employer reimbursement, the employer may make a reasonable estimate of the employee’s costs.

For more information, contact one of the tax team or your Hayes Knight Advisor.

Shelley-ann Brinkley Associate – Tax Consulting
T +64 9 414 5444
E shelley-ann.brinkley@hayesknight.co.nz

Phil Barlow
Tax Director
T +64 9 414 5444
E phil.barlow@hayesknight.co.nz