Some allowances are taxable and others are tax free. Our mileage rate can be used to reimburse travel expenses. GST credits can be claimed for reimbursement allowances.
Legislation enacted on 30 June 2014 clarifies when accommodation and employee allowances are non-taxable.
Most of the new rules will take effect from 1 April 2015 but employers who meet certain criteria may be able to apply some of the new rules from 1 January 2011.
Find out more in the Employee allowances special report on our Tax Policy's website.
If you're self-employed you can use our mileage rate to calculate the cost of using your motor vehicle for business purposes. If you're an employer you can calculate an employee's reimbursement when they use their private vehicle for work purposes. Employers may also use rates published by a reputable independent New Zealand source to reimburse their staff.
Payments that reimburse expenses for work-related employee relocations can be exempt income of the employee provided certain conditions are met.
Volunteers often have expenses associated with their voluntary activities either from the activity itself or travel to or from where the activity took place. Reimbursement payments based on actual expenditure or a reasonable estimate are exempt income.
Benefit allowances are payments made to employees in addition to salary or wages. Food or accommodation may also be a benefit allowance. Tax is payable on the difference between the market value of the benefit, and any amount the employee actually pays.
A travelling allowance is paid to an employee for travel between home and work and can be tax-free providing certain conditions are met.
Reimbursing allowances are paid to employees to cover on-the-job expenses such as meals, mileage or tools. In most cases they are not taxable.
If you are registered for GST, you can claim GST credits on reimbursements paid to employees for business expenses. You cannot claim GST credits on other allowances paid to employees.
Date published: 16 Sep 2004