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Updated IRD rates that may affect you and your business

May 30, 2016

Inland Revenue has recently updated its mileage rates for expenditure incurred for the business use of a motor vehicle and use-of-money interest rates.

Mileage rates

A recent review of the Commissioner's mileage rate has resulted in a reduction to the 2016 income tax year rate. The new rate has decreased from 74 cents to 72 cents per kilometre for both petrol and diesel vehicles. This reduction is a result of the lower average fuel costs and overall lower operating costs expected during the 2016 income year.

Self employed

Self-employed taxpayers are able to use the above mileage rate up to a maximum of 5,000km of work-related travel each year. There is no restriction on engine size or fuel type for motor vehicles.

Self-employed taxpayers must use one of the following methods if their business related travel is over 5,000km:

actual expenditure

log book method.

Employee reimbursement

The above rate may be used as a reasonable estimate by employers for reimbursing employees' (and shareholder employees that meet the definition of employees) expenditure incurred by the employee in connection with their employment.

Employers have the right to use an alternative rate from another reputable source other than the Inland Revenue's rate to reimburse employees, for example the New Zealand Automobile Association Incorporation.

The Commissioner does not propose to amend the returns of taxpayers who have already filed their 2016 returns using the 2015 mileage rate.

Use-of-money interest rates

Debit interest

Inland Revenue charges interest daily on outstanding amounts of tax (more than $100) this includes penalties, and is charged from the day after the payment is due. This use of money interest was reset from 8 May to 8.27% (down from 9.21%) for underpayment of tax.

Credit interest

Inland Revenue will pay interest on overpaid tax from the later of the day after at 1.62% from 8 May (down from 2.63%) for overpayment of tax:

your payment was due

you make a payment which creates a credit balance

you file your return.

Inland Revenue is continually reviewing and updating its rates to ensure they align with market rates, and it is important for you to keep up to date with these.

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