Motor Vehicle Expense claims

There are 2 options when it comes to claiming motor vehicle costs for your business. Whichever you decide to use, you need to complete a logbook to calculate what your business portion of mileage is.

Firstly we have outlined the purpose of a Logbook and why you are required to prepare one.

Logbook

Your logbook needs to be recoded for a 90-day test period (once every three years), and should contain detailed information including:

  • The date and odometer reading at the start and end of the 90-day test period,
  • The date and distance of each business journey,
  • The reason for any business journey.

Both of the options are now available for small companies as well as sole traders, so that instead of paying FBT on a motor vehicle, the private portion of vehicle costs are either not claimed or treated as shareholder drawings. This only applies for a company if the vehicle is the only non-cash benefit.

Here are the two options you can utilise

Per Kilometre Rate.

For this, you need to know what you total annual mileage is, then from your logbook you will calculate the business portion. The following formula should be applied:

Km rate x Total annual Kms x business portion.

The Km rate is published by IRD each year. This rate takes into account all of the costs that you would usually spend on the vehicle

The current rates are as follows:

Vehicle typeFirst 14,000 kmsAfter 14,000 kms
Petrol or diesel76 cents26 cents
Petrol hybrid76 cents18 cents
Electric76 cents9 cents

Actual costs.

From your logbook you will calculate the business portion and multiply this by your total actual costs for the year. This method is only usually used if the mileage rate would be less than actual costs.

Useful links:

https://www.ird.govt.nz/business-income-tax/expenses/mileage-rates/

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