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Calculate the adjustment for the business use of a private motor vehicle

For the business use of a private motor vehicle the same three options apply as for other private goods or service.

The business use percentage will come from your logbook, which must be kept for a minimum of three months. See Apportionment methods for more information about logbooks.

How to calculate the adjustment for the business use of a private motor vehicle using the period-by-period GST adjustment

The table below explains how to calculate the adjustment for the business use of a private motor vehicle using the period-by-period GST adjustment.

Scenario:

James uses his private car for business use. The cost of the car was $40,000 and its present market value is $30,000. His three-month logbook test period showed 30% business use. The last two months' total running costs for the car including GST were $1,385, including:

  • insurance $135
  • petrol $1,000
  • repairs $150
  • registration $100

Step What to do Example
1

Work out the asset's market value.

The vehicle's market value is $30,000.

2

Find out the straight line depreciation rate for the asset.

The straight line depreciation rate for this vehicle is 18%.

3

To work out the value of the business use revenue item adjustment, ie to adjust for running costs, multiply the running costs for the asset for the taxable period by business use percentage.

$1,385 x 30% = $415.50

4

Work out the value of business use capital item adjustment:

  • multiply the asset's market value by the asset's straight line depreciation rate in percentage
  • divide by the number of taxable periods per tax year, and
  • multiply by business use percentage.

$30,000 x 18% = $5,400

$5,400 divide by 6 = $900

$900 x 30% = $270

5

Work out the total business use adjustment:

  • add the business use revenue item adjustment and the business use capital item adjustment
  • divide by 9 - this is your GST adjustment
  • show this GST adjustment on your GST adjustments calculation sheet (IR372) under "Business use of private/exempt goods and services for annual or period-by-period adjustments"
  • transfer the totals to Box 13 on your GST return.

$270 + $415.50 = $685.50

$685.50 divide by 9 = $76.17

How to calculate the adjustment for the business use of a private motor vehicle using the annual GST adjustment

Scenario:

James contacts his tax agent to discuss his GST adjustment options. His agent advises him to cease making period-by-period adjustments. He explains that he would calculate James' annual adjustment at the time he prepares his income tax return.

James receives a full breakdown of his annual GST adjustment for his car from his tax agent. The figure is $456.96 which is one-ninth of the total of his business use. This was calculated using the capital and revenue adjustment method. This annual adjustment covers the period of a tax year from 1 April to 31 March.

James was aware he had already claimed some period-by-period adjustments in his GST returns for the periods ending May, July and September of that tax year. James refers to his paperwork and established that he had claimed a total GST adjustment of $228 (one-ninth of $2,052) for the above periods. James must deduct what he has already claimed.

The annual GST adjustment less the already claimed adjustment is: $456.96 - $228.00 = $228.96.

James shows it in his GST adjustments calculation sheet (IR372) under "Business use of private/exempt goods and services for annual or period-by-period adjustments". He then transfers the totals to Box 13 on his GST return.

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Date published: 10 Apr 2008

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