Expense Reimbursement Policy in New Zealand

Modified on: Thu, 20 Nov, 2025 at 1:54 PM

Unlike some jurisdictions, New Zealand does not impose a universal statutory cap on business travel reimbursements. Instead, the Inland Revenue Department (IRD) focuses on whether the expense is genuinely business-related. If reimbursements meet this test, they are generally non-taxable to the employee; otherwise, they may be treated as a taxable benefit.

Key Principles

Purpose Matters: Travel must be incurred in the course of employment or in deriving income. Employers should document the business purpose clearly.
Home-to-Work Travel: Travel between an employee’s home and their usual workplace is considered private and not deductible. Reimbursements for such travel are likely taxable.
Evidence Required: There is no strict legal requirement to include the company name on receipts, but businesses must keep taxable supply information for GST input credits and sufficient evidence for deductions.

Common Reimbursable Business Travel Costs

Transport: Airfares, train fares, taxis, ride-share, rental cars for business trips away from the usual workplace.
Mileage: Employees using their private vehicle for business journeys can be reimbursed at a reasonable rate. IRD publishes annual kilometre rates (2025 rates: Petrol $1.17/km, Diesel $1.26/km, Hybrid $0.86/km, Electric $1.08/km for first 14,000 km; lower Tier 2 rates apply thereafter).
For more information, go to How is mileage reimbursement calculated in New Zealand?
Accommodation: Hotel or short-term rental costs for overnight business travel, supported by invoices.
Meals & Incidentals: Meals during overnight stays can be reimbursed and are generally deductible if they represent actual costs incurred. Meals with clients may fall under entertainment rules (see below).
Parking, Tolls, Public Transport: Deductible when incurred for business purposes and supported by receipts.

Rates and Tax Treatment

No Fixed Caps: Reimbursements should reflect actual costs. Excess amounts may become taxable to the employee.
Mileage Reimbursement: Payments at or below IRD kilometre rates are typically tax-free. Higher rates require substantiation and may trigger PAYE. [taxathand.com]
For more information, go to How is mileage reimbursement calculated in New Zealand?

Entertainment Expenses

50% Deductibility Rule: Meals or social events with a private element (e.g., staff parties, client lunches) are usually only 50% deductible.
FBT Exposure: If entertainment is provided as a perk (e.g., vouchers, weekend trips), it may be fully deductible but subject to Fringe Benefit Tax (FBT).

GST Considerations

Businesses registered for GST can claim input tax on travel expenses used for taxable activities. Keep taxable supply information (valid invoices) for all claims. Mixed-use costs require apportionment between business and private use.

Best Practices for Employers

Document Business Purpose for every trip.
Keep Receipts and Mileage Logs for compliance.
Apply IRD Rates for mileage to simplify tax treatment.
Review Entertainment Rules to avoid unexpected FBT.
Ensure GST Records meet IRD requirements.

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