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Paying Employees Allowances – What you need to know

By SmartPayroll | September 30, 2013

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).

Mileage allowance

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.

Benefit allowances

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.

Travel allowances

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.

Reimbursement allowances

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.

Need help?

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 and we’ll help you out!