Claiming Motor Vehicle Expenses in NZ: A Guide for Business Owners

If you use a vehicle for business purposes in New Zealand, you may be able to claim motor vehicle expenses to reduce your taxable income. Whether you’re self-employed, a freelancer, or a small business owner, understanding how to claim these expenses correctly can help you save money and stay compliant with tax laws.

What Motor Vehicle Expenses Can You Claim?

When using a vehicle for business purposes, you can claim costs associated with:

• Fuel

• Warrant of Fitness (WOF)

• Registration

• Maintenance and Repairs

• Insurance

• Depreciation (if the vehicle is owned by the business)

However, how much you can claim depends on whether the vehicle is used exclusively for business or if it has mixed-use (business and personal).

100% Business Use vs. Mixed-Use Vehicles

• 100% Business Use: If your vehicle is used solely for business, you can claim all related expenses as business costs.

• Mixed-Use (Business & Personal): If you use the vehicle for both business and personal purposes, you must accurately track business-related travel to claim expenses.

How to Claim Motor Vehicle Expenses

There are three methods available to claim motor vehicle expenses in New Zealand:

1. Logbook Method

A logbook is one of the most accurate ways to claim expenses. You must track your vehicle use over a 90-day period to establish the percentage of business vs. personal use. Once determined, this percentage remains valid for up to three years unless usage patterns change significantly.

Your logbook must include:

• Start date of the 90-day period

• Odometer reading at the beginning and end of the period

• Date, distance, and reason for each trip

For example, if your logbook shows that 70% of your vehicle use is for business, then you can claim 70% of all vehicle expenses as business costs.

2. Claiming Up to 25% of Running Costs

If you don’t want to maintain a logbook, you can claim up to 25% of total running costs as business expenses. However, this method is less precise, and if IRD audits your tax return, you may need to provide additional proof of business usage.

3. Claiming Actual Costs

Instead of using a logbook or a fixed percentage, you can track all actual costs related to business trips and only claim those specific expenses. This requires detailed record-keeping, including receipts and invoices for fuel, maintenance, insurance, and registration.

Best Practices for Maximizing Your Claim

✅ Keep Accurate Records – Store receipts, invoices, and logbooks to support your claim.

✅ Use a Mileage Tracking App – Digital apps can help automate mileage tracking and ensure accuracy.

✅ Separate Business and Personal Use Clearly – If using a mixed-use vehicle, be clear about what counts as a business trip.

✅ Consult a Tax Expert – If unsure, seek professional advice to maximize your deductions and stay compliant with IRD rules.

Final Thoughts

Claiming motor vehicle expenses correctly can provide significant tax savings for businesses in New Zealand. Whether you choose the logbook method, the fixed percentage claim, or actual costs, ensuring accurate records and compliance with IRD regulations is key. If you need help, reach out to a tax professional who can guide you through the process and optimize your claim.