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Do you use Vehicle for your business? The kilometre rates to calculate deductions for business use of motor vehicle have been updated for the 2017-2018 income year.


IRD has broadly classified this approach in two parts and these are:

• Reimbursements to employees using their own vehicle in the employer’s business and
• Deductions available to person using vehicle for both business and private purpose
For 2017/18 year, rates are as follows:

Vehicle Type

First 14,000 Kms

After 14,000 Kms

Petrol or Diesel

76 cents

26 cents

Petrol Hybrid

76 cents

18 cents


76 cents

9 cents


Reimbursing an Employee

Basically, this applies to employee being reimbursed for business running cost, including shareholder-employee. The reimbursement is based on either:
• reasonable estimate, and this specifically includes commissioner mileage rate or
• actual costs
Where an employee has maintained a logbook which evidently confirms their employment use, the 76cents/km rate can be applied to business portion of first 14,000 kms. If in case no evidence is maintained then 76 cents/km rate is limited to first 3,500 kms (i.e., 14,000*25%).
For actual cost reimbursements, both employer and employee must keep accurate records including details of private and work-related costs.
NOTE: For the year 2018-19, the employers can use 76 cents/km to calculate tax-free reimbursement amount from the date the new policy was released i.e., 9th July 2018 up to 31st March 2019.The rate prior to 9th July 2018 was 73 cent/km.


Deduction for Motor Vehicle used for Business Purpose

This applies to motor vehicles used for dual purposes by persons in business (being sole traders or close companies).
Kilometre rate * Kilometres travelled * business proportion
The first and foremost step is to calculate the business proportion either using log book or actual cost. The result is then multiplied by actual cost or Kilometre rate times kilometre travelled. The kilometre rates are set by commissioner annually. Failure to maintain logbook limits the business use of 25%. The odometer reading must be recorded at each balance sheet date to determine whether 14,000 km reading ahs been exceeded or not.
The previous 5,000 km limits no longer apply.


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