New kilometre rate for claiming motor vehicle expenses
Are you using your car for business purposes? It’s timely to outline the process for claiming tax on your work vehicle expenses.
- If you’re using a vehicle for business purposes, you can claim tax back on expenses.
- If you use the vehicle only for business, you can claim the full running costs. If you use the vehicle for any personal travel, you’ll need to separate the running costs of your vehicle between business and private use.
- There are two ways to calculate the business usage:
- Actual costs mean keeping accurate records, including details of private and work-related expenses. You also need to show the reasons for business travel and the distances involved.
- Use a logbook to record all business trips and then calculate an actual business use percentage for each period. Or keep a logbook for at least 90 consecutive days to work out the business use of your vehicle, which you can then use for the next three years (as long as the nature of the business varies by less than 20% over that time).
- Once you have the business proportion, you can use the Inland Revenue’s kilometre rates to work out how much you can claim:
- Tier One is calculated as a combination of the vehicles’ fixed and running costs. It applies for the business portion of the first 14,000 km travelled by vehicle in a year.
- Tier Two accounts for running costs only and applies for the business portion of any travel in excess of 14,000 kms.
- To make claiming your business usage easier, make sure you record odometer readings at the end of every year (31 March) to help determine your business mileage vs personal mileage.
If you are a company and provide vehicles to staff (including yourself!), you will need to make sure you’ve got your fringe benefit tax position right.
Talk to us as there are exemptions that may apply for specific types of vehicles or where restrictions are placed on the use of company owned vehicles.