The New Kilometre Rate for Claiming Motor Vehicle Expenses

Are you an employee who frequently uses his/ her car for business expenses? We’re going to be outlining the process for claiming tax on your work vehicle expenses.

Here are some important points which you need to consider:

1. If you’re using a vehicle for business purposes, you can claim tax back on expenses incurred.

2. If the vehicle is solely being used for business purposes, the entire running cost can be claimed. However, if the vehicle is being used for personal travel as well as business purposes, the running costs of the vehicle will have to be split between business and private use.

3. There are two ways by which you can calculate the business usage of the vehicle:

• Actual costs which requires you to keep accurate records, which include the details of personal and work-related expenses. The reasons for business travel and distances involved will also have to be provided while filing your claim.

• A logbook can be maintained to record all business trips, based on which an actual percentage of business use can be calculated. Alternatively, you can also keep a logbook for at least 90 consecutive days, to work out the business use of your vehicle which can then be used for the next 3 years (as long as the nature of the business varies by less than 20% over that period of time).

4. Once you’ve ascertained what the percentage for the business use of your vehicle is, you can use the IRD’s kilometre rate (shown in the table below) to work out the amount which can be claimed. There are 2 rates defined by the IRD, which are:

• Tier One Rate: Tier One is calculated by combining the vehicles fixed and running costs. This tier applies for the business portion of the first 14,000 kms travelled by a vehicle in a year.

• Tier Two Rate: Tier Two accounts for just the running costs of the vehicle and can only be applied for the business portion of the any travel in excess of 14,000 kms.

To make the process of claiming your business usage of the vehicle easier, make sure you record odometer readings at the end of every year to help you determine your business mileage vs personal mileage.

If you’re a business which provides its staff with vehicles (including yourself), it is prudent to ensure you’ve got your fringe benefit tax position right.

You can get in touch with us to know what exemptions may apply for specific types of vehicles, or in instances where restrictions are placed on the use of company owned vehicles. Mail us your queries on info@jzr.co.nz, or simply call +64-9-972-2236