If you are paying your employees a motor vehicle allowance as a part of their salary package this is taxed as a part of their wages. A better way would be for the employee to submit their actual expenses for reimbursement or submit a mileage claim. Both of these are non-assessable in the hands of the employee and are claimable as a tax deduction for the business, therefore removing the need for the employee to be taxed on these amounts.
Alternatively you could reimburse them for mileage – the current kilometre rate is $0.95c p/km for the business use of vehicles for the 2023 income year.
Source: https://www.taxtechnical.ird.govt.nz/operational-statements/2023/os-19-04-km-2023
