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 Motor Vehicle Expenditure (sole traders-partnership)

When private motor cars are used for business use motor vehicle expenditure is apportioned to get the deductible amount related to business use.

There are 4 methods for calculation the business use proportion:

1. Actual records are kept, showing the reasons for each journey for which the motor vehicle

is used and the distance of each of those journeys.

2. A logbook is maintained for a test period for the purpose of establishing the business

proportion of the motor vehicle’s use. This proportional amount is then able to be used for

calculating deductions for a period of up to three years.

  • Logbook

The business use of a motor vehicle can be calculated by keeping a logbook for a test period

  • f at least 90 consecutive days. After 90 days, the average proportion of business to private

use of a motor vehicle is calculated. The term of the logbook is up to three years, provided

any variance of the vehicle’s business use is less than 20% of that represented in the logbook.

  • The logbook must record:
  1. the start and end of the 90-day test period
  2. the vehicle’s odometer readings at the start and end of the test period
  3. the distance of each business journey
  4. the date of each business journey
  5. the reason for each business journey
  6. any other detail that IRD may require.

3. Mileage rates may be used if a person’s business use is 5,000 kilometres or less in an income

year. Under this method, a person must keep records of the distance they have travelled

for business purposes using the motor vehicle. The distance is then multiplied by mileage

rates.
The current mileage rate as per IRD is 73 Cents per km for Hybrid vehicles and 81 Cents per km for electric vehicles.

4. If a person has not used one of the three methods above, that person’s deduction calculation

is limited to the default method, which is to apply the proportion of actual business use of

the vehicle or 25% of the total use of the vehicle, whichever is less.

 

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