Claiming vehicle expenses

By: Greg Douglas

If you use your vehicle for business there are several options that you can choose from to get reimbursement for that use.

Vehicle expenses can be claimed on either the actual running cost of the vehicle (whereby all expenses are taken into account such as fuel, servicing, repairs and maintenance and licensing and records are kept), or by claiming an allowance for the use of the vehicle based on the kilometres travelled for business purposes.

• Logbook
The logbook method applies to sole traders, trusts or partnerships as well as employees who receive reimbursements for the use of their private vehicle. A logbook is kept to calculate the business usage. If you are putting all the vehicle expenses through your business accounts (including depreciation) you must keep a logbook. A logbook must be kept for a minimum of 90 days and must record the start date and vehicle odometer reading on this date, the distance and reason for each business journey and the end date and odometer reading on this date. This process will need to be repeated every three years and the result of the logbook will determine the portion of expenses claimable on the vehicle. For example, if the use of the vehicle relates to 70 percent of business use, then the business in entitled to claim 70 percent of all expenses relating to this vehicle.

• Simplified logbook
This is a simplified form of the logbook where only business kilometres and the reason for trips are recorded. At the end of the year the business claim is calculated using the kilometres used multiplied by either the IRD rates – 79 cents per kilometre – or AA rates (which are better for high cc cars). The rates are now two tiered with the first 14,000 kilometres at the initial rate then a tier two rate for the balance of any mileage to be claimed. The rates and two tier rates are available from the IRD website or the AA. There are different rates for petrol, diesel and hybrid and electric cars in the tier two rates.

• Fringe benefit tax
Companies have the option of paying fringe benefit tax or using the logbook method. Fringe benefit tax (FBT) is a set calculation based on a percentage of the GST inclusive value of the vehicle. If the vehicle is available to you any time of the day, whether you use it or not, you need to pay FBT. There are exceptions for days when the vehicle is not available to you for a period of 24 hours. If using FBT, all the expenses related to the vehicle should be claimed through the business, as they are 100 percent deductible. The FBT you pay is also deductible.


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