Motor Vehicle Expenses?

If you have a vehicle expense that is partly for your business and partly for your private use, you can claim the proportion that relates to your business. 

Motor Vehicle Expenses can include:

• Petrol

• Repairs & maintenance

• Insurance

• Warrant of Fitness fees

• Registration fees

• Road user charges

If you use your own vehicle in the business, you can claim the running costs for income tax. You are required to keep a logbook for at least three months and work out the percentage used for business. You must do a logbook at least every three years, however you can do it sooner than three years if you consider that your business percentage has increased. If the percentage has decreased by more than 20% you are required to do it again. I encourage that all vehicle expenses are paid from your business account including insurance, registration, and repairs.

You have a choice of two methods to claim motor vehicle expenses for business use of a motor vehicle. It is based on the actual costs incurred in business use of vehicle or an amount calculated using the kilometre rate method.

Actual Costs Method

• Under the actual cost’s method, the motor vehicle expenses are calculated by multiplying the actual costs by the proportion of business use. You need to keep accurate records of all actual costs incurred including details of private and business-related expenses. You can work out the business use of your vehicle by keeping a logbook or you can claim up to 25% of all vehicle expenses. You could be asked the justify the percentage claimed. (If no log book is kept.)
  

  Kilometre Rate Method

  Under the kilometre rate method, the motor vehicle expenses are calculated by multiplying the IRD’s kilometre rate by the total kilometre’s travelled in the year by the proportion of business use

  There are two tiers of kilometre rate that can be applied to calculate your motor vehicle expenses.

• Tier one: The tier one covers your vehicle’s fixed and running costs. This rate will apply with respect to the first 14,000 km per year.

• Tier two: The tier two only covers running costs. Once vehicle has travelled more than 14,000 km per year, tier two rate must be applied.

  You can work out the business use of your vehicle by keeping a logbook for at least 90 consecutive days. If no logbook is kept, the use of Tier one rates is limited to the first 3,500kms. Your calculation can be used for up to 3 years if the proportion of business use does not change by more than 20%. After 3 years you will need to keep a logbook for another 90 days.