Mileage Rate review by Inland Revenue

Inland Revenue has announced that after its review, it has reduced the mileage rate it authorises for business travel of 5000 kilometres or less. The new rate is 74 cents per kilometre a reduction of 3 cents per kilometre from previous. This rate is used to claim business travel costs in lieu of actual receipts for sole traders who use their vehicle in business or by employers as a reasonable estimate of costs when they reimburse employees for the use of the employees’ private vehicle for business related travel.

The reduction was based on the IRD’s review of average fuel costs during the 2015 year among other measures. IRD is required by statute to publish a rate each year. Alternatives to using this rate include maintaining a logbook and actual receipts to claim your actual business costs. Or alternative rates published may also be used if you determine that the IRD rate is not reflective of your actual costs.

Using a mileage rate does not apply to vehicles owned by a company that are provided to employees. It also does not apply to motor cycles, hybrid and/or electric motor vehicles as these modes of transport are, according to IRD, not commonly used for business purposes.

If your tax return for 2015 has already been completed and used the previously published rate of 77 cents, the Commissioner does not propose to amend the returns for taxpayers who have already filed their return.

You may have questions over the use of this rate and whether it is better to own, rent or lease a vehicle. Fringe benefits tax is also a complicating factor in this decision. Please contact us if you are considering the use of a vehicle in business or changing over to a new vehicle and how best to structure that. The proper consideration of the tax implications of use is an important consideration.