New rules for mileage rates
A bill is before Parliament which has a section dealing with tax deductions based on mileage. The calculation we currently use is fairly straight forward - the rate is 72¢ a kilometre and the maximum number of kilometres you can claim for is 5000.
From 1st April 2017 the 5000km limit is to be removed, which is good for those travelling more kilometres, BUT it is being replaced with a slightly more complicated system that requires additional record keeping.
IRD is hoping this will be a simplified calculation in the long run as you will no longer need to keep track of your actual vehicle expenses. The proposal instead allows small businesses and sole trader taxpayers to use standard values per a two tier system which will be updated annually to reflect market changes.
Essentially all you need to do at this stage to keep up with the new changes is:
- Record your vehicle odometer reading when you finish work on 31 March 2017;
- Schedule into your calendar that you will need to record your odometer reading on 31 March 2018 and each 31 March onwards;
- Keep a log book for three months to represent your business and private travel – this will be used for calculations for the next three years. Alternatively you can keep a log book for the entire year but three months will suffice;
- When providing your end of year tax documents please provide your odometer readings and log book to us so that we can work out your vehicle claim!
If you are unsure whether this new rule applies to you, please go ahead and record your odometer reading tonight or first thing tomorrow morning so that you are ready regardless.
Please note if you change vehicles during the year you will need to record the odometer reading before disposing of your vehicle and also ensure you record the odometer reading of the new vehicle.
If you have any further queries or want to know more then please give us a call 03 578 3386 or email us email@example.com – we can help.