How do I claim expenses for use of a motor vehicle?

If you use a vehicle solely for your business, claiming expenses is straightforward—you can claim all vehicle running costs. However, if your vehicle doubles for both business and personal use, you need to carefully separate these costs. Remember, travel between your home and usual workplace counts as personal use.

IRD outlines three main ways to calculate vehicle expense claims:

1. Logbook Method

Keeping a logbook is one of the most accurate ways to calculate your vehicle's business use. Here's how it works:

Maintain a detailed logbook tracking your business-related travel for at least 90 consecutive days.
Calculate the percentage of business use based on your logbook records.
Use IRD's published kilometre rates to determine the cost and depreciation deduction for your vehicle.

When you use IRD kilometre rates:

GST doesn't need to be separately considered, as these rates include GST and depreciation.
You can't claim separate depreciation or recovery of depreciation.

2. Fixed 25% Method

If you don’t keep a logbook, IRD allows you to claim a flat rate of 25% of your vehicle's running costs as business expenses. Be mindful, though—IRD may require you to substantiate how you arrived at this claim.

3. Actual Costs Method

Another precise approach is tracking all actual vehicle costs. You’ll need detailed records of both business and personal expenses, including:

Fuel purchases (petrol, diesel, hybrid, or electricity)
Maintenance and servicing
Insurance and Warrant of Fitness (WOF)
Parking fees

Your records must clearly indicate:

Purpose of each business trip
Distances travelled on each business journey

Additionally, using this method allows you to separately claim depreciation on your vehicle for business usage.

Kilometre Rates: What to Know

IRD publishes kilometre rates annually, typically by May, for the previous tax year ending 31 March. You should always apply the kilometre rate from the specific tax year you're claiming.

If reimbursing an employee, continue using the most recent published rate until a new rate is provided by IRD.
Prior to the 2018 income year, claims based on kilometre rates were capped at 5,000 km per year.

Special Considerations

Vehicles powered by petrol, diesel, hybrid, or electric can use any of these three methods. Once you've selected a method, stick with it throughout your vehicle’s ownership.
For other types of vehicles, you must use the Actual Costs method.
Car parking expenses incurred for business activities can also be claimed, treated similarly to other vehicle expenses.

Accurately tracking your vehicle expenses helps ensure compliance and maximises your legitimate deductions. Prosaic simplifies managing vehicle expense claims, making compliance with IRD guidelines easy and clear.