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Hi there, I have been using my car for business purposes. My employee contract states "You may be required to use your own personal vehicle to attend client meetings and will be reimbursed for mileage at the standard legislative rate required". As such, I have claimed for expenses at the IRD standard rate of 77c. My employer has told me that they will only reimburse at a rate of 62c. They said this is based on an average of rates compiled from Public service, AA and IRD and that they 'exclude the depreciation component of the allowance as we do not reimburse for the capital cost, only the operating costs.' Is this correct? I called the IRD and they said it should be 77c but wanted to check with AA too. Your advice is much appreciated.

As you say, the IRD rate is 77c per km, however the AA rates are also acceptable to the IRD, but are calculated on the type of vehicle. Hence, a small car up to 1.5 litre is 53.2c per km and the rate goes up depending on the car to $1.07 per km for a large car over 3.5 litres.
All our rates include capital outlay and depreciation, which are major components in the running of a vehicle.
However, none of these rates are set in stone or are legislated as to what an employer should reimburse an employee - that comes down to a negotiation between the parties, although I would have thought this should be agreed upon up front.

Hi ABayliss, thank you for your quick reply. Would you be able to tell me what mileage rate would apply for a Peugoet 206 Wagon 1.6 litre?
Is there a calculation that can be used to work out the depreciation / capital outlay component? Thanks again for your help

The AA rate for this car would be 64c per km. However, our rates are based on a car at the 3rd year of age where depreciation is a significant component. On a 10 or so year old car such as your 206, it would be much less, so the 62c per km your employer is paying is quite generous.
The other factor to consider is that the IRD rate of 77c per km (across all makes, models, ages and engine sizes) is capped to 5,000km per year and requires keeping a log book, receipts etc. The AA rates have less constraints as we have calculated them out to be quite accurate.
Personally, I'd be more than happy with 62c per km on your car as it probably exceeds the real running cost.

Thanks ABayliss - you have put the issue to rest in my mind.

HI, I understand the 5000km cap with the IRD is only for self-employed, but if its for reimbursing an employee there is no cap and it continues at 77cents?

The IRD rate (ie; for tax purposes) is capped at 5,000km. Reimbursement between an employer and an employee is a separate matter and can be negotiated between both parties at any rate the parties settle on. It could well be 77c per km but not necessarily.