Kilometre rate changes announced by IRD

Every year, IRD advises of rates to apply in claiming a mileage deduction for business use of motor vehicles. These rates are in place of claiming actual business vehicle running costs or when a vehicle is owned by the business (and it may be liable for fringe benefits tax on that vehicle).

For the 2020/2021 year, IRD has just announced these new rates:

The Tier 1 rate is available to use for business miles incurred in the first 14,000 total kilometres travelled by the vehicle in the year.

After the first 14,000 kms, the Tier 2 rate must be used for all remaining business travel.

Although the rates have reduced from last year, (the tier 1 rate was 82 cents) the method of applying them is the same. The rate has reduced as IRD claims the reduced rate is to reflect lower fuel, interest and maintenance costs.

In previous years, when a tax return for the year has already been filed, IRD accepted the use of the most current rate having been used at the time of filing. With the rate reducing, there may be a different approach this year.

If you’re unsure about when to use these rates or about claiming expenses relating to business motor vehicle use, contact us. The documentation for this change can be found here. (Link valid at June 11th 2021)

Also of note, in claiming home office expenses, IRD has increased the square meter claim rate to $44.75.