A mileage allowance is a payment employees receive for using their personal vehicle for work-related travel, such as visiting clients. It doesn’t apply to commuting between home and the regular workplace.
Mileage allowances are tax-free, as long as they don’t exceed the statutory rates for 2024-2025, effective from 1 April 2025:
| Vehicle Type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol | NZD 1.17 | NZD 0.37 |
| Diesel | NZD 1.26 | NZD 0.35 |
| Petrol Hybrid | NZD 0.86 | NZD 0.21 |
| Electric | NZD 1.08 | NZD 0.19 |
- Tier 1: Covers both fixed and running costs. Use for the business portion of the first 14,000 kilometres travelled in an income year (including private travel).
- Tier 2: Covers running costs only. Use for business travel beyond 14,000 kilometres in an income year.
If an employer pays a mileage allowance above the maximum rate, the excess is treated as taxable income.
Alternatively, companies may reimburse actual vehicle costs, supported by accurate records (e.g. fuel purchases).