2016 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.

A recent review of the Commissioner’s mileage rate, results in a reduction to the rate to 72 cents per kilometre for both petrol and diesel fuel vehicles for the 2016 income year.  The weighted average rate of 0.71975 cents per kilometre is calculated for the 2016 income year, compared to a weighted average of 0.73971 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.

The Commissioner accepts that 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 motor cycles, 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.