The vehicle reimbursing rates are based upon the 2009 AA review of costs. We are not proposing any change to the rates we calculated last year and have reproduced below the 2008 update Memo.

The 2009 AA survey shows an overall reduction in costs of about 9%. Much of the reduction in costs comes from lower financing costs (ie, lower interest rates). Our formula gives less weight to financing costs as often the church is bearing at least some of this cost, and so our calculation is less sensitive to reductions in this area.

In the context of the wide range of circumstances these rates are used the small changes in costs are not significant, and the existing rates as below are still fair to employer and employee.

The suggested (maximum) reimbursement rates be the following (present rates in brackets) -
• up to 14,000 km annual running for all purposes - reimburse work running at 65 cents (64 cents).
• up to 20,000 km annual running for all purposes - reimburse at 53 cents (52 cents).
• up to 26,000 km annual running for all purposes - reimburse at 46 cents (44 cents).
• for mileage beyond chosen band range - reimburse at 25 cents (22 cents).

Alternatively, the flat rate of 36 cents (32 cents) per km can be paid for unlimited running (ie without the need to record annual mileage and be concerned about exceeding a chosen band).

Notes:
This review is based on the same assumptions as the ICWPT agreement made with the IRD in 1996, updated for changes in costs. The calculations have been based upon the AA cost calculations for 2008 with some adjustments for our circumstances.

Change in AA categories: The AA has changed the categories for reporting costs, such that we don't have a direct reference from the previous AA calculations we have used. The above calculation is based upon the combination of the 2008 AA categories for ‘compact' cars (1500cc to 2000cc) and ‘medium' cars (2000cc-3500cc), whereas we have previously used a 1600-2000cc category. The extension by AA of the class previously used to include smaller 1500cc cars has lowered the calculated costs such that if we used just that class (1500-2000cc) no increase in rates would be justified, and our old rates would in fact look too high!

Interest costs: As we have done in the past, it assumes not all interest costs are relevant and claimable. Not all clergy will have actually incurred interest costs on the purchase of their vehicle and where they have the church has often provided finance at concessionary rates. The AA interest cost component has therefore been scaled back.

Petrol price: A petrol price of $2.00 has been used in the modelling. The difference between that and current prices (say $2.15) does not make a big difference to the answer - about 1c per km - and such a difference is well within the calculation parameters.

As previously, our calculations are an average and intended to cover a wide range of circumstances. As petrol costs increase, drivers can be expected to move to smaller more efficient cars which should act as a restraint on our rate increases which are an average.

We are aware that this review may not meet expectations and drivers are very aware of increased petrol costs. Petrol has indeed increased as a percentage of total running costs and is now about 28% of running costs (at 14,000 km) by the AA calculations. This has increased steadily in recent years but has been offset by more subtle changes in other cost components such as the fuel efficiency of vehicles. As the annual distance travelled increases, the petrol component becomes a more significant portion of total costs and this is reflected in the greater proportionate increases and the longer distance bands.

Motorists are paying a larger portion of their total costs in cash on the service station forecourt where the increases make a big impression. Overall running costs have not in fact increased very much.

We are aware some other employers may be paying higher rates, but the above is tailored to our circumstances which is what the IRD expects employers to do. The reimbursement of occasional employee motor vehicle use with a single rate is not comparable to the circumstances of the churches.

Norman Hopkins
Inter Church Working Party &
Anglican Tax Unit
July 2008

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