How to Claim Vehicle Expenses on Taxes
Vehicle expenses can be a significant cost, often disrupting your monthly cash flow and adding up when it comes to taxes. Fortunately, claiming vehicle expenses on your taxes is an effective way to offset these costs and improve your bottom line.
By accurately tracking and deducting business-related vehicle expenses, you can reduce your taxable income and keep more money within your business. We’ll guide you how to deduct vehicle expenses so you can maximise your claim while staying compliant with New Zealand tax laws.
Whether you’re using a personal vehicle for work trips or have a vehicle dedicated to business activities, the IRD offers several ways to claim these expenses. From logging mileage for occasional business trips to claiming full expenses for business-only vehicles, understanding these methods can make a significant difference in your tax obligations.
Keeping a Logbook for Mixed-Use Vehicles
A logbook tracks the proportion of business versus private use of the vehicle. It helps determine what portion of expenses can be claimed. You’ll need to keep a logbook for 90 consecutive days, recording each business and personal trip, including distance and purpose. This log establishes the percentage of business use, which remains valid for three years.
At the end of this period, calculate the percentage of business use (e.g., 70% business and 30% personal). This percentage applies for the next three years and determines how much of your vehicle expenses are tax-deductible.
Claimable Expenses: With the business-use percentage calculated, you can claim that portion of expenses like fuel, maintenance, insurance, registration, and depreciation.
There are many other business expenses that you can claim in compliance with IRD regulations. If you want to know more, read our comprehensive guide on how to claim business expenses in NZ.
Claiming Actual Costs for Business-Only Vehicles
If a vehicle is used exclusively for business, you can claim 100% of vehicle costs without needing a logbook. Keep thorough records of all expenses, including fuel, repairs, insurance, and depreciation.
Important Note: You need to clearly demonstrate that the vehicle is only used for business purposes, so it may be beneficial to have a separate vehicle for personal use.
Mileage Rate for Business Use of Personal Vehicles
This method is ideal for business owners who use a personal vehicle for occasional business travel. You can claim a set mileage rate instead of specific expenses. Record the kilometres driven for business purposes and apply the IRD’s per-kilometre rate (e.g., 79 cents per km for petrol and diesel as per recent rates). Multiply this rate by business kilometres to determine your deduction.
The benefit? This method simplifies record-keeping, especially if business travel is limited.
Depreciation of Business Vehicles
Vehicles owned by the business can depreciate over time, and the business can claim this depreciation as a tax-deductible expense. Use the IRD’s set depreciation rates for vehicles to calculate annual depreciation. This amount reduces taxable income, reflecting the vehicle’s loss in value over time.
The benefit? Helps spread the cost of the vehicle across its useful life, providing tax relief each year.
GST Deductions on Vehicle Expenses
If you’re GST-registered, you can claim the GST component of vehicle expenses used for business. For mixed-use vehicles, claim only the business portion of GST. For business-only vehicles, claim the full GST amount. This method reduces the total cost of expenses, providing additional tax savings.
If you are still confused, you should talk to our Manukau and Auckland accountants. They can guide you on how you can deduct GST on vehicle expenses.
Expert Tips for Claiming Vehicle Expenses in NZ
Claiming vehicle expenses can significantly impact your business’s cash flow and tax obligations. By choosing the right method and keeping accurate records, New Zealand businesses can optimise their deductions and maintain a healthy financial position.
- Maintain Accurate Records: Whether using a logbook, claiming actual costs, or recording mileage, detailed records are essential for compliance.
- Stay Updated on IRD Rates: Mileage rates and depreciation rules can change, so check IRD guidelines each tax year for the latest information.
- Seek Professional Advice: The best method for claiming vehicle expenses can vary based on your business model and how you use your vehicle. Consulting with experienced chartered accountants ensures you’re maximising deductions while staying fully compliant with NZ tax laws.
If you’re looking for guidance on minimising vehicle expenses through tax claims, contact Business Like today. Our team of experienced accountants in Auckland is here to help you navigate your options, determine the most beneficial method, and tailor solutions that align with your business needs.
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Brendan Price – Partner
I started working at Business Like in late 2013 and appointed partner in 2017. I work with a wide range of clients in trades, manufacturing, technology, financial services as well as high net worth individuals. I’m passionate about helping business owners achieve their business and related goals. A keen fisherman and brewer, I love a beer in the weekends after a day with my young family.
I have a Bachelor of Business Studies with majors in Accounting and Marketing. I’m a Chartered Accountant and hold a current certificate of public practice.
Rachel Darlington – Partner
I began my accounting career in the corporate arena working for a merchant banking firm for approximately ten years. I joined Business Like in February 2008. In 2009 Rachel Lamb and I joined forces to create Business Like NZ Ltd. In 2014, I teamed up with Brendan Price and have continued to grow Business Like NZ Limited. I have a farm in Ardmore where most weekends I’m tending to the land or my ever-growing menagerie of animals.
I am a Chartered Accountant and hold a current certificate of public practice. My qualifications include a Bachelor of Commerce and a postgraduate diploma in Professional Accounting.
Vinh Nguyen – Partner
With over 15 years of experience working in CA Firms, I bring a wealth of knowledge and expertise in the areas of business advisory, compliance and taxation. As an experienced client manager, my focus is on fostering and maintaining strong client relationships. I have two children and enjoy travelling and going to live music events.
I’m a Chartered Accountant (CA) with a Bachelor of Commerce, majoring in Accounting and Commercial Law.