For many businesses, a vehicle is an essential tool—whether for transporting goods, visiting clients, or simply keeping daily operations running smoothly.
There are multiple ways a vehicle can be treated in your business accounts. The method you choose can have lasting implications on your expense deductions, business profits, and overall tax liability. It’s important to carefully consider which approach best aligns with how the vehicle is used in your business.
Options for Accounting for Your Business Vehicle
1. Logbook Method
Completing a logbook is a great option if the business use of your vehicle outweighs personal use.
· A logbook must be maintained for a consecutive 90-day period.
· The business/private use ratio established is valid for three years, or until your usage significantly changes.
· This method allows you to claim GST and expenses based on actual business use.
Good for: Sole traders or owners of mixed-use vehicles who want to claim actual costs proportionately.
2. IRD Business Use Percentage (No Logbook)
If no logbook is maintained, IRD allows you to claim up to a maximum of 25% for business use.
· This percentage is applied to all vehicle-related expenses, including fuel, insurance, repairs, and depreciation.
· The remaining 75% is treated as personal use.
· While simpler, this method may limit your deductions if business use is actually higher.
Good for: Business owners who want a straightforward approach but don’t have a logbook or accurate mileage data.
3. Shareholder Motor Vehicle Contribution (Fringe Benefit Tax Adjustment)
This is often the simplest and most effective option when a company-owned vehicle is used for both business and private purposes.
· The company can claim GST on the vehicle purchase, claim all running costs and depreciation.
· An annual adjustment is completed based on IRD rates to account for the personal benefit (FBT).
· Once this method is chosen, you must method and annual adjustment for five years or until the vehicle is sold.
Good for: Company-owned vehicles with regular private use.
4. Mileage Reimbursement
This method suits business use of a privately owned vehicle when that use is minor or irregular.
· Mileage reimbursement is calculated using the total annual business kilometres and the current IRD mileage rate.
· There is no need to bring the vehicle into the business’s asset register.
· GST is not claimable on mileage reimbursements.
Good for: Sole traders, rental properties or employees using their personal car occasionally for business purposes.
Time to Review?
If you’re unsure which option is best for your business, or if it’s time to revisit the method you’re currently using, please get in touch. The right vehicle strategy can help maximise your deductions, streamline compliance, and ensure you're not leaving money on the table.
Contact us today to book a time to discuss the approach best suited to how you run your business.
