Claiming business expenses: Mileage rate
Mileage rate for employee reimbursement and self-employed people
Mileage rate for self-employed people
If you're self-employed you can use our mileage rate to calculate the cost of using your motor vehicle for business purposes.
Standard mileage rate for motor vehicles
The mileage rate for motor vehicles is 70 cents per kilometre.
This rate applies from 1 April 2008. If you have a non-standard balance date the rate applies from the beginning of your 2008-09 income year.
You can use this rate for up to a maximum of 5,000 km of work-related travel per year. For distances greater than 5,000 km, you must keep a record of actual vehicle expenses.
The rate applies irrespective of engine size or whether your vehicle is powered by a petrol or diesel engine. The mileage rate does not apply to motor cycles.
For information on mileage rates before 1 April 2008 read our Tax Information Bulletin, Vol 7, No. 8 (February 1996).
Calculating business motor vehicle use if you're self-employed
There are three ways you can calculate the proportion of business use of your motor vehicle:
- actual expenditure
- a logbook, or
- a mileage rate.
Actual expenditure
If you believe your vehicle expenditure is higher than the rates given you can use the actual expenditure option.
You can claim deductions on your actual expenditure including depreciation loss for the business use of your motor vehicle. If you use this method you must keep accurate records including details of private and work-related expenses. Your records will need to show the reasons for and the distances of journeys for business travel.
Logbook
You can also work out the business use of your vehicle by keeping a logbook for at least 90 days. After 90 days you can work out the average proportion of business to private use of your vehicle. The logbook term is up to three years, provided variance of business use is less than 20% of the logbook representation.
The logbook must record:
- the start and end of the 90-day test period
- the vehicle's odometer readings at the start and end of the test period
- the distance of each business journey
- the date of each business journey
- the reason for each business journey.
You can use your logbook to calculate the deduction for the expenditure you incur and the amount of depreciation loss for the business use of your motor vehicle.
Find out more about the mileage rate >
Mileage rate for employee reimbursement
If you're an employer you can use our mileage rate to calculate an employee's reimbursement when they use their private vehicle for work purposes.
Standard mileage rate for motor vehicles
The mileage rate for motor vehicles is 70 cents per kilometre. This rate applies from 1 April 2008.
The 5,000 km limit for self-employed people does not apply to employers using the mileage rate to reimburse employees. Although employers may use the mileage rate to reimburse employees that reimbursement must be a reasonable estimate of the expenditure likely to be incurred by the employee.
The reimbursement is exempt from income tax "to the extent to which it reimburses the employee for expenditure for which the employee would be allowed a deduction if the employment limitation did not exist". Employers who reimburse employees for business travel in excess of 5,000 km will need to consider whether the mileage rate is still a reasonable estimate of the employee's expenditure.
The rate applies irrespective of engine size or whether your vehicle is powered by a petrol or diesel engine. The mileage rate does not apply to motor cycles.
For information on mileage rates before 1 April 2008 read our Tax Information Bulletin Vol 7, No. 8 (February 1996).
Reimbursing employees for motor vehicle expenses
To reimburse staff, including shareholder-employees using their own vehicle for work, you can either use:
- our mileage rate, or
- rates published by a reputable independent New Zealand source representing a reasonable estimate (for example New Zealand Automobile Association mileage rates), or
- actual costs.
Actual expenditure
You can reimburse an employee's actual expenditure instead of using the mileage rates. For this method both the employer and employee must keep accurate records, including details of private and work-related expenditure, to justify the reimbursements.
Or, you can make a reasonable estimate of the amount of expenditure likely to be incurred by your employee or group of employees.
Find out more about the mileage rate >
Date published: 09 Jul 2009
Back to top
