Re-reimbursement for Travel to & from work

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Eitsop

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#248235 15-Mar-2019 19:45

IRD says
Sometimes employers pay cash allowances to an employee for travel between home and work.
A cash allowance paid to an employee for travel between home and work is tax-free if:
- the amount paid reimburses an employee's additional transport costs, and
- has no adequate public transport system that serves the workplace.

This applies to us we have no public transport available.. and its 75km away

Re-embursement can be
- mileage rate
- Actual Costs Eg cost of petrol + 4 tires per year?

Official IRD Mileage rate can be
- First 55km/day @ $0.76/km
- Subsequent Kms @ $0.26/km

So a 150km round trip , this would calculate as
- 55 x 0.76 + 95 x 0.26
- $66/per day (first $5/day is taxable)
- $17000 pa

I currently get given $2500,
I car pool with 2 others, who will also get $2500 as an allowance, so only $7500.. far cry from IRD $17000
even if the car was full, only $10000 would be accumulated

I would prefer these options be considered by my company
- driver only of carpool given full IRD rate of $66/day to bring in upto 4-5 people per day depending on car size
- make a company car/van available for transport of staff, which maybe cheaper than carpool cost.

There is some argument that Company can't give us company pool car to use as to take 4 employees home as FBT applies.. I disagree.. does anyone have a definitive answer?

Surely if IRD allows $66/per day to be paid tax free, then they could allow a work car to be used?

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#2199041 15-Mar-2019 19:54

The IRD advice relates to how much the company can deduct as expenses, and how much you can receive before FBT applies.

How much over / under that is between you and the company.

IRD also accept rates provided by the AA which a more dependant on the Make/Model of your vehicle.

There's no legal reason they can't provide a pool car however someone will likely have to pay the FBT - it's a company decision.

Although there are certain exemptions for vehicles (contractually) only available to be driven for work purposes...

andrewNZ

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#2199042 15-Mar-2019 19:55

So, there are probably many things to consider here, the first of which is the fact that the company isn't typically obligated to reimburse you for your travel to your normal place of work.

My initial thoughts are that you are lucky to be getting anything.
Some more details about why/where you have to travel may change my mind.

Eitsop

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#2199045 15-Mar-2019 19:58

I travel from Christchurch To Ashburton each day & return..

I just started the job and they offered me $2500 and offer others same

solutionz

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#2199093 15-Mar-2019 20:05

Either do the calculations on company vehicle deductions & FBT and present a case as to how it will be in the company's benefit...

Or see if the company will take you on as a contractor then claim your own travel deductions etc.

andrewNZ

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#2199096 15-Mar-2019 20:10

So they made you an offer, which you accepted.

If that is the case, you have the option of trying to renegotiate, but they are under no obligation to change the deal.

I think what you have here is a life lesson in considering offers properly.

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#2199099 15-Mar-2019 20:12

attewell:

I travel from Christchurch To Ashburton each day & return..

I just started the job and they offered me $2500 and offer others same

If they offered you that and you accepted then that's on you. You knew the job was in Ashburton and chose to accept it. The company has no legal or moral obligation to compensate you in any way.

It's be a different story if they relocated to Ashburton when you were already employed but it doesn't sound like that is the case.

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sbiddle

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#2199123 15-Mar-2019 20:52

As pointed out what IRD allow a company or contractor to claim means very little in the context of what you're claiming. FBT also needs to be factored into this in situations where it will apply.

No company needs to pay somebody for traveling, and if they offered you an amount and you accepted it I'm not too sure what the issue is.

solutionz

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#2199155 15-Mar-2019 21:32

Alternatively come up with an independent secondary business idea justifying you driving from Christchurch to Ashburton each day...

i.e. deliver fresh cookie-time cookies to a local business daily or something.

Now you can deduct your all your travel as well as your home office, internet etc.

https://www.stuff.co.nz/business/money/93240365/budget-buster-how-the-selfemployed-can-pay-as-little-tax-as-possible

Obviously seek advice of an accountant to ensure you remain compliant...

Aredwood

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#2199173 15-Mar-2019 21:51

Since you carpool with 2 other employees. If all of you were to claim the full distance. The daily total distance being reimbursed would be 450Km per day. When in reality, only 150Km per day is actually being driven. My understanding is that mileage payments are solely to reimburse vehicle running costs, and are not intended to pay for anything else. In my opinion, claiming for more mileage than what you and your coworkers cars have actually traveled is a form of tax avoidance. Unless there is an exemption for carpooling.

Working as a contractor would be even worse. As you would then be receiving payments to drive other people around. You might then have to go through the same process that Uber drivers have to comply with.

The company should only be paying you and your coworkers 50km per day each. To avoid any potential tax liabilities.

Disclaimer, I'm not a lawyer or accountant.

solutionz

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#2199195 15-Mar-2019 22:17

Aredwood: Since you carpool with 2 other employees. If all of you were to claim the full distance. The daily total distance being reimbursed would be 450Km per day. When in reality, only 150Km per day is actually being driven. My understanding is that mileage payments are solely to reimburse vehicle running costs, and are not intended to pay for anything else. In my opinion, claiming for more mileage than what you and your coworkers cars have actually traveled is a form of tax avoidance. Unless there is an exemption for carpooling.

Working as a contractor would be even worse. As you would then be receiving payments to drive other people around. You might then have to go through the same process that Uber drivers have to comply with.

The company should only be paying you and your coworkers 50km per day each. To avoid any potential tax liabilities.

Disclaimer, I'm not a lawyer or accountant.

I understand your point but remember that expenses are only deducted from the income you actually earn; there is no free tax rebate you're "stealing" - it's just a question of how much tax on your income you pay.

In saying that tax law isn't always so meticulous when apportioning expenses... Case and point you can just elect to pay the full (49%) vehicle FBT rate and all non-business related use is also covered (no matter how minimal the business use is), likewise other specified expenses like phone, internet etc are claimed in full.

I'm not sure what the exact rules are but it looks like a similar case may exist with a home office and multiple home businesses - you calculate the Sqm usage which may overlap for both businesses and claim that.

We're getting into gray areas but generally when IRD provides these "all inclusive" options like the fixed mileage rates it is just that - but at the same time IRD has wide reaching anti-avoidance clauses so an intention of good faith is required.

Geektastic

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#2199254 15-Mar-2019 23:23

I'd certainly be happy to get paid to travel to work (at least, if I did not work for myself!) - it's pretty rare and I am impressed that the IRD allow it at all.

As far as I can logically work out, only the person who owns the car ought to be getting paid.

On the other hand, it may be one of those scenarios where you get an allowance and it's up to you what you do with it.

I'd suggest getting proper advice because the IRD are a PITA if you get offside with them.

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antoniosk

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#2199273 15-Mar-2019 23:52

https://www.ird.govt.nz/payroll-employers/make-deductions/staff-benefits/allowances/emp-deductions-allowances-travel.html

It might be worth clarifying who is paying the tax here; if it's getting added to your paye as 'income', then it's you that pays. Note this sentence:

"If you pay a travelling allowance because there's a lack of adequate public transport, only the first $5 of the daily travelling allowance is taxable"

Also note here:

https://www.ird.govt.nz/business-income-tax/expenses/vehicle-exp/

"If you use the vehicle to travel from home to work, or any personal travel, you will need to separate the running costs of your vehicle between business and private use. (Travel between home and work is not classed as business use.)"

Of course, this is for self-employed people, not staff

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#2199275 15-Mar-2019 23:57

attewell:

I car pool with 2 others, who will also get $2500 as an allowance, so only $7500.. far cry from IRD $17000 even if the car was full, only $10000 would be accumulated

I am trying to understand why you drive your car and others get an allowance. It's your car on the road, your petrol. Why would everyone get paid?

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wired

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#2200460 17-Mar-2019 21:49

attewell:

Official IRD Mileage rate can be
- First 55km/day @ $0.76/km
- Subsequent Kms @ $0.26/km

Employers I have worked for don't pay the $0.76/km on a private car as that is a payment for the standing costs of the car. These costs would have been covered by the owner whether the car was used to travel or not.

So they only paid the smallest rate.

wired

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#2200465 17-Mar-2019 21:56

Forgot to add that an employer is working out much to pay for such allowances, they can would work to a Total Employment Cost (TEC) amount for the position, which what they budget for. So if the person requires a car, then that amount gets subtracted from the TEC along with any other allowances, professional memberships etc. what is left is the salary offered to the employee. So if the allowances go up, the salary goes down.

I don't know if you remember what happened with the employer Kiwisaver contributions going up, peoples salaries didn't rise - which is what people got upset at.

So it can depend on how you want the money - salary or allowance but rarely can you have both.

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