Tips to stay on top of the different rules when you have work vehicles

Tips to stay on top of the different rules when you have work vehicles 

Depending on whether you’re a sole trader, partnership or company, claiming the expenses associated with work vehicles can prove a challenge. Especially if you use the vehicle for both work and personal use. 

Logbooks are useful records of business expenses relating to work vehicles and this is important when calculating what tax deductions you can claim. Depending on your business entity type, different tax rules apply when you use motor vehicles to earn income, and you might use a logbook to track expenses in different ways. 

Sole Traders/Partnerships 

If you’re a sole trader or in a business partnership, you can claim your motor vehicle expenses provided the vehicle is used to help earn income for the business. If you don’t use the vehicle exclusively for business, you can only claim a percentage of vehicle expenses. You’ll need to keep track of when you use the business for work use – you can do this by using a logbook to track actual costs or using the logbook over a test period to work out your average business usage. 

Be aware that travelling to and from home is not a business-related expense. You also can’t pop out for lunch or detour to the supermarket to pick up groceries on your way home. It’s best to keep the logbook clearly confined to travel for business purposes. 

If you don’t keep a logbook but use the vehicle for private use (for example driving from home to work), then the maximum amount you can claim is 25%. 

Companies 

The calculations for companies are a bit different as it takes into account if the vehicle is available for personal use. If the vehicle is used for personal use or is available for personal use then it incurs Fringe Benefit Tax (FBT). 

You can use logbooks (or one of the electronic logbooks mentioned above) to keep track of work-related costs and to show that the vehicles are work-related vehicles which are used for work purposes only and therefore don’t attract FBT. 

If you use the vehicle for both business and personal use, the logbook can show that FBT has been accounted for correctly. 

Logbook Options 

You can keep a traditional logbook on paper, download a template from the IRD or use one of the eight electronic logbooks that have been approved for use in New Zealand. These are ERoad, Gravy, Logmate, Sibatec, SmartMove, Teletrac Navman, Trackit and Picobyte Solutions. 

If you’re using a logbook to t estimate the average business use of your vehicle over a test period, the logbook must record the start and end of the 90-day test period, the vehicle's odometer readings at the start and end of the test period, distance of each business journey, the date of each business journey and the reason for each business journey. 

Whatever type of business structure you have, we can advise you on keeping good records and with understanding what you can claim. If you need help with your logbook, get in touch and we can help you sort this out.