Claiming motor vehicle expenses

What you can claim for 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

Sole Trader & Partnership

If you are a sole trader or partnership, you can 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 kilometer rate method.

  • Actual Costs Method

Under the actual costs 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.

  • Kilometer Rate Method

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

From the 2019/2020 year, there are two tiers of kilometer 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.

Company

Company can use the same methods above for a sole trader & partnership if it is a close company (5 or fewer shareholders) and only one or two motor vehicles are used by shareholder-employees for their private use.

You can claim GST on the purchase price of the motor vehicle. If you do this, you can claim GST on the proportion that relates to your business. You could be required to adjust the GST claimed if the actual business use is different to the original GST claim.