While not quite as exciting or interesting as some of our more recent blogs, here are two important updates from IRD that you need to know.

Mileage Rates reduced from 74 cents to 72 cents 

The annual review of the IRD mileage rate has been completed and resulted in a reduction to the rate to 72 cents for both petrol and diesel fuels for the 2016 income year. This reduction is largely due to lower average fuel costs during the year compared to the prior year and that vehicles are (to some extent) more efficient. Points to note are:

- mileage can only be claimed up to a maximum of 5,000kms in the income year (regardless if actual travel exceeds this threshold)

- people who meet the criteria have a choice of either using the IRD mileage rate or actual costs of travel if they consider that the IRD mileage rate does not reflect their true costs. Taxpayers that choose actual costs are required to keep records to support any expenditure claimed. 

- 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. Alternatively, employers may use an alternative estimate for reimbursing employees.

- the mileage rate does not apply to motor cycles, hybrid and/or electric vehicles as these modes of transport are not commonly used for business purposes. Any self-employed persons who uses these forms of transport for business purposes will need to calculate their actual expenditure.

Use-of-money interest rates fall

The use-of-money interest (UOMI) rates on underpaid and overpaid tax will fall from 8 May 2016.

The interest rate charged by Inland Revenue on underpaid tax will drop from 9.21% to 8.27%. Great news! However, the downside is the rate for overpaid tax will drop from 2.63% to 1.62%. Rates are reviewed regularly to ensure they align with market interest rates.