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Second Resurgence Support Payment Applications for the 2nd Resurgence Support Payment (RSP) for the alert level increase that started on 17 August are now open Resurgence Support Payment

The Clean Car Discount scheme was introduced to make it more affordable to buy low CO2 emission vehicles.

From 1 July 2021 until 31 December 2021, a rebate will be paid (on application) to the first registered person of an eligible vehicle (or to a lessor where the first registered person of the vehicle is a lessee).

If proposed legislative changes become law, from 1 January 2022 the Clean Car Discount will be based on a vehicle's CO2 emissions. Vehicles with zero or low emissions will qualify for a rebate and those with high emissions will incur a fee.

For more details on the Clean Car Discount, see Clean Car Discount - All updates 

Clean Car Discount - All updates | Waka Kotahi NZ Transport Agency (nzta.govt.nz)

If you are in business, you need to be aware of the tax consequences if you:

  • receive a rebate or pay a fee under the Clean Car Discount scheme
  • lease a vehicle that comes under the Clean Car Discount scheme.

The outcome varies, depending on what you use the vehicle for.

Getting the rebate

If you get a rebate under the Clean Car Discount scheme, you will not have to pay income tax on the rebate. One of the following will apply, the rebate will be:

  • excluded income under the rules relating to government grants (if you are claiming depreciation deductions on the motor vehicle)
  • a capital receipt.

Paying the fee

A fee payable under the Clean Car Discount scheme is a capital expense.  Because it is a capital expense, you will not get a deduction for the amount of the fee.

Claiming depreciation

If you use the vehicle in your business or lease it to a lessee under an operating lease, 1 of the following will apply to the base cost of the motor vehicle, it will be:

  • reduced by the amount of any rebate under the rules relating to government grants
  • increased by the amount of any fee.

Under existing rules, if you lease the vehicle to a lessee under a finance lease, you will not be able to claim depreciation deductions. The base cost of the motor vehicle for the lessee will be determined under the financial arrangements rules in the usual way.

Fringe benefit tax (FBT)

If you make the vehicle available to an employee for their private use, you must pay FBT based on the cost of the car to you (or to the owner if you lease the car).

The cost will be either:

  • reduced by the amount of any rebate, if proposed legislative changes become law, with effect from 1 July 2021
  • increased by the amount of any fee.

Goods and services tax (GST)

If you are GST registered and get a rebate under the Clean Car Discount scheme for a vehicle you use in your taxable activity, the rebate will be treated as consideration for a deemed supply by you under the rules relating to government grants (unless you are a public authority). This means you must return the GST in your next GST return.

Example: Clean Car Discount rebate

A company carries on a business and is registered for GST. The company acquires a new electric vehicle (EV) on 1 August 2021. The EV is made available to an employee for their private use as part of their remuneration package. The cost of the EV from the dealer is $49,999 (including GST). The company receives a rebate of $8,625 (including GST) from Waka Kotahi under the Clean Car Discount scheme on registration of the vehicle.

Original cost (including GST) $49,999
GST input tax claimed $ 6,522
Net cost for income tax purposes before the rebate
$43,477


Rebate (including GST) $ 8,625
GST output tax payable) $ 1,125
Net rebate received $ 7,500


The rebate is not subject to income tax
Depreciation cost base $35,977
FBT cost price (including GST) $41,3741
FBT cost price (excluding GST) $35,9771

1Subject to proposed legislation changes becoming law with effect from 1 July 2021.

Example: Clean Car Discount fee

The same company acquires a new diesel powered motor vehicle on 1 February 2022 for use in its business. The vehicle is made available to an employee for their private use in the weekends. The cost of the vehicle from the dealer is $59,999 (including GST). The company pays a fee of $5,175 (including GST) to Waka Kotahi under the Clean Car Discount scheme on registration of the vehicle.2

Original cost (including GST) $59,999
GST input tax claimed $ 7,826
Net cost for income tax purposes before the fee
$52,173


Fee (including GST) $ 5,175
GST input tax claimed) $ 675
Net fee paid $ 4,500


The fee is not deductible for income tax purposes
Depreciation cost base $56,673
FBT cost price (including GST) $65,174
FBT cost price (excluding GST) $56,673

2 The liability to pay a fee from 1 January 2022 is subject to proposed legislative changes becoming law.

Last updated: 04 Aug 2021
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