2012 review of the Commissioner’s mileage rate for expenditure incurred for the business use of a motor vehicle

Operational Statement 09/01 ("OS") published in the Tax Information Bulletin Volume 21, Number 3 (May 2009) provides the Commissioner's statement of a mileage rate for expenditure incurred for the business use of a motor vehicle. This OS provides that the Commissioner will review mileage rate on a yearly basis.

Inland Revenue has reviewed the motor vehicle mileage rate to reflect the average cost of running a motor vehicle, including the average fuel prices, and has changed the mileage rate for the 2012 income year to 77 cents per kilometre for both petrol and diesel fuel vehicles.

The Commissioner is required by statute to set a mileage rate for persons whose business travel is 5,000 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 Commissioner's mileage rate or 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 accepts that employers may use the 2012 vehicle mileage rate as a reasonable estimate of costs when they reimburse employees for the use of their private vehicle for business related travel. As employers are required to make a reasonable estimate of expenditure incurred by employees on their behalf, at the time of making reimbursements, it is not envisaged that the vehicle mileage rate will apply retrospectively to settled employee reimbursements.

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 motor cycles.