Deducting Vehicle Expenses For Business:

What You Should Know As An NZ Business Owner

You can claim certain expenses as business expenses on your taxes, saving money while ensuring you continue to fund your business. If you use vehicles for your company, such as to make deliveries, then the money you spend on your vehicle counts as money put towards running your business.

As a business owner, it’s extremely important to properly keep records and understand the IRD’s rules for business deductions to properly file your taxes. Choosing the right method can improve cash flow and reduce tax burdens, setting your business up for sustainable growth and consistent success.

Understanding tax laws and deductible business expenses can be confusing, especially when you already have so much to do when running your company. So, we at Business Like are happy to help. We are experts when it comes to NZ tax obligations and business finances, and we can work together to see how you can deduct your vehicle expenses when filing your taxes.

Why Deducting Vehicle Expenses Is Important For NZ Businesses

Understanding your business’s expenses is important, as they can be deducted from your taxable income. Day-to-day taxable expenses for your business can include costs like paying wages or advertising your products.

If you use a vehicle purely for your business, then you can claim that vehicle’s expenses as business expenses. This can include costs for fuel, maintenance and so on. However, if you use a vehicle for both personal and business matters, you will need to work out the costs so you can correctly file your vehicle expenses.

Deducting vehicle costs is essential because, for many businesses, vehicle expenses are a major operational cost. If you use cars or trucks to make deliveries, reach clients, pick up supplies and so on, the money you spend on fuel and maintenance can eat into your profits.

Deducting these expenses can help you financially by:

Reducing Taxable Income. This could lower your taxes, giving you more money to funnel back into your business.
Improve Bottom-Line Profitability. The more profits you make, the quicker you can make upgrades and grow your company.
Enhancing Cash Flow. As we all know, cash flow is vital for any kind of business.

The Key Methods We Can Use To Claim Vehicle Expenses

Of course, it’s vital that you accurately track your vehicle expenses to ensure full compliance with IRD regulations, avoiding issues and costly penalties. We at Business Like can assist with the following methods to ensure you have accurate data about your business vehicle usage:

Using A Logbook For Mixed-Use Vehicles. A logbook tracks the usage of your vehicles and is especially useful if you use your vehicle for both business and personal use.

Using this logbook method, you should keep track of your personal and business vehicle expenses for 90 days. This should include the purpose and distance of each trip. Then, you can calculate the percentage of business use versus personal use. The business-use percentage then determines the deductible portion of expenses for fuel, maintenance, insurance and depreciation.

The calculated percentage is then valid for three years.

Claiming Costs For Business-Only Vehicles. If your vehicle is only for business use, then you do not have to keep a logbook or track the percentages of personal and business use. Instead, you should thoroughly track expenses like fuel, repairs and so on. It’s strongly advised to keep a separate vehicle for personal use to simplify compliance and to maintain clear records to demonstrate that your business vehicle is never used for personal matters.

Mileage Rates for Personal Vehicles Occasionally Used For Business. If you mainly use your vehicle for personal trips but sometimes use it for business, then you may still be able to deduct some vehicle expenses. You can do this by tracking the kilometres you use for your business trips and then applying the IRD’s per-kilometre rate. You can then calculate your deductions by multiplying the mileage rate by your total business kilometres.

Depreciation Of Business Vehicles. Vehicles depreciate over time, and this depreciation can be claimed on your taxes. You can follow the IRD’s rates for vehicle depreciation to spread the cost of a vehicle over its useful life.

GST Deductions For Vehicle Expenses. GST-registered NZ businesses can claim GST on vehicle expenses as well. Make sure that you only claim business-related GST - if you have a mixed-use vehicle, you can only claim the business-use portion of GST.

Optimising Your Tax Strategy With Business Like

We understand that tax regulations and deductibles can be rather complex, which is why we at Business Like are here to help. Our tax specialists can strategise with you to maximise your deductions and more when it’s time to pay your taxes.

Are you interested in deducting your vehicle expenses? Consider calling us on 09 262 0726 or using our contact page to reach us.

Business Like: Maximise your business potential with our financial specialists.