The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

Anthony McIlroy
Published on

odometerThe weighted average rate of 0.71975 (approx 72c) cents per kilometre is calculated for the 2016 income year, compared to a weighted average of 0.73971 (approx 74c) for the 2015 income year. 

The reduction is largely due to a lower average fuel costs during the 2016 income year (petrol $1.955 and diesel $1.178) and overall lower operating costs.  The 2016 income year for business taxpayers with a standard 31 March balance date, runs from 1 April 2015 to 31 March 2016.

The Commissioner is required to set a mileage rate for persons whose business travel is 5,000 km or less in an income year.  

The mileage rate is set retrospectively for persons required to file a return for business income, so that the rate reflects the average motor vehicle operating costs for an income year. 

Those persons who meet the criteria have a choice of using the mileage rate method or they may use actual costs if they consider that the Commissioner’s mileage rate does not reflect their true costs.  Taxpayers that choose to use actual costs are required to keep records to support any expenditure claimed.

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

Employers may 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 for a current income year (post 1 April 2016).

Also, employers may use an alternative estimate other than the Commissioner’s vehicle mileage rate when reimbursing employees for use of their private vehicle for employment related use.  It is accepted that employers may use the motor vehicle running cost data published by other reputable sources, for example the New Zealand Automobile Association Incorporated, as an alternative reasonable estimate for reimbursement of employees.

The mileage rate does not apply in respect of motorcycles, hybrid and/or electric motor vehicles as these modes of transport are not commonly used for business purposes.  Any self-employed persons who use these forms of transport for business purposes will need to calculate their actual expenditure or in the situation of an employer reimbursement, they may make a reasonable estimate of the employee’s costs.

If you would like to discuss how the change in mileage rate affects your business, please call  Alliotts  in Auckland today on 09 520 9200.

Source Inland Revenue

Topics: employers fuel mileage rates motor vehicle rate tax