myIR, payments and more

Tāke moni whiwhi mō ngā pakihi

In this section

## Business income tax

### Claiming business expenses

Kilometre rate

Using your own vehicle in the business

Travel expenses

Holiday homes - mixed-use assets

Entertainment expenses

Capital (consumer) contributions

Environmental expenditure

Tracking expenses

# Kilometre rates for self-employed people and employees

Use our kilometre rates to calculate the cost of using your motor vehicle for business purposes and your private vehicle for work purposes.

### GST

There are no GST implications for kilometre rates for self-employed people and employee reimbursement.

### If you're self-employed

There are two ways you can calculate the proportion of your motor vehicle business use. You can either use actual costs, or a logbook.

#### Kilometre rates

Once you have calculated the business proportion for the 2017-18 and later income years, you can choose to use kilometre rates to calculate the amount of allowable expense for the cost of using your motor vehicle for business purposes.  You can do this by using the following calculation:

#### Calculating cost of using your motor vehicle

kilometre rate x kilometres travelled x business proportion

Where:

• kilometre rate is one of the rates below
• kilometres travelled is the total number of kilometres travelled for business and personal purposes
• business proportion is calculated, using actual records or the logbook method, as a decimal.
Vehicle type First 14,000 kms After 14,000 kms
Petrol or diesel 76 cents 26 cents
Petrol hybrid 76 cents 18 cents
Electric 76 cents 9 cents

### Example

Toby is a property manager and uses his petrol hybrid vehicle for personal and work purposes.

In the 2017-18 income year Toby kept full records and travelled 20,000 km for work and 5,000 km private travel (80% or 0.8 work travel). Toby’s deduction would be calculated as follows:

 First 14,000km: \$0.76 x 14,000km x 0.80 = \$8,512 After 14,000km: \$0.18 x (25,000km - 14,000km) x 0.80 = \$1,584 \$10,096

Toby can claim expenses of \$10,096 for the use of his vehicle for business purposes.

If Toby hadn't kept full records or maintained a logbook, his deduction would be calculated as follows:

 First 14,000km: \$0.76 x 14,000km x 0.25 = \$2,660 After 14,000km: \$0.18 x (25,000km - 14,000km) x 0.25 = \$495 \$3,155

Note: If there are not full records or a logbook maintained the proportion will be limited to the lesser of:

• the actual business use, or
• 25% (or 0.25)

The kilometre rate applies irrespective of engine size and does not apply to motorcycles.

Once you have elected to use the kilometre rates method you must continue to use it for this motor vehicle.

Earlier income years

For the 2016-2017 and earlier income years, you can only use our kilometre rate for business travel up to 5,000km per year.

#### Actual costs

You can use the actual costs option if your vehicle costs are higher than the rates given.

You can claim deductions on your actual costs including depreciation loss for the business use of your motor vehicle. If you use this method you must keep accurate records including details of private and work-related expenses. Your records will need to show the reasons for and the distances of journeys for business travel.

#### Logbook

You can also work out the business use of your vehicle by keeping a logbook for at least 90 consecutive days. After 90 days you can work out the average proportion of business to private use of your vehicle. The logbook term is up to three years, provided variance of business use is less than 20% of the logbook representation.

The logbook must record the:

• start and end of the 90-day test period
• vehicle's odometer readings at the start and end of the test period
• distance of each business journey
• date of each business journey
• reason for each business journey, and
• any other detail that we may ask you for.

You can use your logbook to calculate the deduction for the costs you incur and the amount of depreciation loss for the business use of your motor vehicle.

### If you're a close company with shareholder-employees

From the 2017-18 income year the kilometre rate is available to close companies where the only fringe benefit provided is the provision of one or two motor vehicles to shareholder-employees for their private use.

Close companies can elect to use the motor vehicle expenditure rules instead of paying FBT on the value of the benefit when the close company makes a motor vehicle available to a shareholder-employee for their private use and elects to apply the kilometre rate method.

The election will apply only to new arrangements between a company and shareholder-employees and once a company has chosen to use the kilometre rates method it will need to continue to use it until the vehicle is disposed of or the company stops using the vehicle for business use.

In some circumstances a GST adjustment may be required to reflect any difference between the actual proportions of business and private use of the motor vehicle and the intended proportions of business and private use of the motor vehicle.

For further information, refer to Tax Information Bulletin Vol 29, No 4 (issued May 2017), pages 70 to 71.

### If you're reimbursing an employee

When reimbursing staff, including shareholder-employees using their own vehicle for work, to calculate the tax-free amount you can use:

• our kilometre rate
• rates published by a reputable independent New Zealand source representing a reasonable estimate (for example New Zealand Automobilie Association mileage rages), or
• actual costs.

#### Our kilometre rate

We accept the standard kilometre rate as being a reasonable estimate of the costs likely to be incurred by an employee. An employer may choose to use the applicable vehicle type rate per kilometre shown above for calculating the tax-free amount of an employee's reimbursement.

Where an employee has kept a logbook or other evidence that confirms their employment use, the 76 cents/km rate can be applied to the business portion of the first 14,000km. If evidence has not been kept the rate of 76 cents/km will be limited to the first 3,500km (25% of 14,000). The subsequent rates, depending on vehicle type, may be used for business travel beyond these limits.

### 2018-19 income year

Employers can use the 76 cent rate to calculate the tax-free reimbursement amount for emloyees work-related motor vehicle usage.

The rate applies irrespective of engine size or whether your vehicle is powered by a petrol, diesel or hybrid engine. It does not apply to motorcycles.

Find out more about previous and subsequent kilometre rates

#### Actual costs

You can reimburse an employee's actual costs instead of using the kilometre rates. For this method both the employer and employee must keep accurate records, including details of private and work-related costs.

Or, you can make a reasonable estimate of the costs likely to be incurred by your employee or group of employees.

Find out more about the kilometre rates calculated on actual costs