Motor Vehicles

Private Use of Business Vehicles

Fringe Benefit Tax (FBT)

If a vehicle is owned by a Company and is available for private use by employees (including shareholder employees) it will be subject to FBT, regardless of whether or not the vehicle is actually used privately.

NOTE: in most cases the IRD considers travel from home to work to be private use.

The exception to this rule is if the vehicle meets the definition of a "work related vehicle". The Inland Revenue Department (IRD) defines a work related vehicle as one that meets all four of the following requirements:

  1. The principle design of the vehicle can not be for carrying passengers. Vehicles that can qualify as work related vehicles include utilities (including double cabs), light pick-up trucks, vehicles that are permanently without rear seats such as vans, station wagons, hatchbacks, panel vans and four wheel drives. This will also apply if the rear seats have been welded down or made unusable because of a permanent fixture i.e. shelving.
  2. The company's name or logo is permanently and prominently displayed on the exterior of the vehicle. Magnetic or removable signage is not acceptable.
  3. The company must notify employees in writing that the only private use the vehicle is available for is:
    • Travel between home and work
    • Travel incidental to business travel
  4. The company must record checks (at least quarterly) on each vehicle to ensure restrictions are being followed.

The upside of FBT is that you can claim 100% of all of the expenses in relation to that vehicle i.e. fuel, WOF, registration, insurance, repairs, depreciation etc.

For more information on FBT on vehicles and "work related vehicles" please contact us.

Log Books

If the vehicle is owned by a sole trader or partnership and the business vehicle is used privately (which includes travel between work and home) you don't have to pay FBT but you will need to account for the private use of the vehicle by making an adjustment for GST and Income Tax purposes.

A log book would need to be maintained for a three month period every three years (unless there was a material change to the usage of the vehicle).

The logbook would record the distance, date and reason for the trip.

You can use the difference between the odometer readings at the start and end of the three months to work out the percentage of vehicle expenses you can claim.

If keeping a paper log book is not for you - you may be interested in GPS Logbook which simply plugs into the cigarette lighter in your car.

Business Use of Private Vehicles

If you use you are self employed and use your private vehicle for business use, you can make a public service mileage claim.

The IRD approved mileage rate for motor vehicles is currently 72 cents per kilometre.

You can use this rate for up to a maximum of 5,000 km of work-related travel per year.

For distances greater than 5,000 km, you must keep a record of actual vehicle expenses.

The rate applies irrespective of engine size or whether your vehicle is powered by a petrol or diesel engine. The mileage rate does not apply to motor cycles.