If you run a business with employees, there may be occasions where you need to pay them allowances. Here’s a few types of common allowances and information around their tax requirements (you’ll find this info in our handy free Employee Booklet).
If your employee uses their car for work-related activity like meetings, travel to conferences or running errands, you can provide allowances for them. The standard mileage rate is 77 cents per km but can change. Check out Inland Revenue’s website for more information on this. Remember, mileage reimbursement is exempt from income tax.
Ever sent an employee off to another city for a seminar? You may want to provide an allowance for things like food or accommodation where related to work. The difference between the market value of the benefit and any amount the employee actually pays is taxable.
When a worker travels between home and work they can be paid a travel allowance that is usually tax-free as long as conditions are met. Often when an employee needs to carry special equipment for a certain period as their job demands, their travel method will change – you as an employee may be responsible for covering additional cost of this where applicable.
Circumstances where travel allowances are payable can be found on this page of IRD’s site.
If an employee has work expenses like client lunches, driving to meetings or tools they’ve bought to do their job, your reimbursement to them isn’t taxable in most cases.
GST on allowances
Are you GST registered? Any reimbursements you pay to employees for business expenses can have GST claimed back. Find out more on this here.
If you want to know how to properly process allowances and reimbursements through your payroll, we’d be happy to help. Call 0800 10 10 38 or email firstname.lastname@example.org and we’ll help you out!