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Employer responsibilities
Ngā kaiwhakawhiwhi mahi takohanga

Travelling allowances

Sometimes employers pay cash allowances to an employee for travel between home and work.

Definition

A cash allowance paid to an employee for travel between home and work is tax-free if:

  • the amount paid reimburses an employee's additional transport costs, and
  • there are one or more special circumstances.

What special circumstances are

Special circumstances are where the employee:

  • is working outside the normal hours of work (eg, in overtime, shift or weekend work)
  • needs to carry work-related tools and equipment (eg, usually they take the bus but must use other transport to shift work-related gear)
  • is travelling to fulfil a statutory obligation
  • has a temporary change in workplace
  • has some other condition of their job, or
  • has no adequate public transport system that serves the workplace.

Calculating the tax-free amount

For most of these special circumstances, the tax-free amount is:

the actual cost of travelling between home and work - the employee's usual transport costs

If you pay a travelling allowance because there's a lack of adequate public transport, only the first $5 of the daily travelling allowance is taxable. Any additional amount is tax-free.

You can use our mileage rates if the actual cost per kilometre is not available.

What do I have to do?

  • Add the tax-free amount of the allowance to your employees' net salary or wages (ie after PAYE) when you pay them.
  • Do not show the tax-free amount on your Employer monthly schedule (IR348).
  • Show the total amount of the tax-free allowance paid in your wagebook.