By Phil Barlow – 8 August 2012

Whilst the mileage rates are subject to regular reviews in order to reflect the actual cost of running a vehicle, in reality they have not changed considerably over many years. Until now…

Many people will be familiar with the use of the IRD motor vehicle mileage rates or for those of us that have been around a little longer, the “public service mileage rates”.

Whilst the rates are subject to regular reviews in order to reflect the actual cost of running a vehicle, in reality they have not changed considerably over many years.

The Inland Revenue has however just increased the rate from 74 cents per kilometre to 77 cents per kilometre for the 2012 income year (i.e. 1 April 2011 to 31 March 2012, for those with a standard balance date).

This change is applied retrospectively to assist taxpayers who are required to file a return of business income, so that the rate reflects the average motor vehicle operating costs for an income year.

The revised rate applies to both petrol and diesel vehicles (irrespective of engine size), but not for motorcycles.

These mileage rates can be used to calculate non-assessable motor vehicle allowances paid by an employer to an employee. The rates also apply in respect of self-employed taxpayers for work-related travel up to a maximum of 5,000 kilometres each year.

Employers may choose not to use the IRD’s prescribed mileage rates and instead use an alternate method (such as actual costs or log book method) to make a reasonable estimate of costs when they reimburse employees for the use of their private vehicle for business-related travel.

Employers may also use an alternative rate that has been published by a reputable source, for example the New Zealand Automobile Association Incorporated.

If you have any questions please contact your Hayes Knight adviser or our Tax Team:

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

Shelley-ann Brinkley Senior Tax Manager
T +64 9 414 5444
E shelley-ann.brinkley@hayesknight.co.nz