Claiming Vehicle Expenses Correctly: Essentials for NZ Businesses

Ever wondered if that trip to meet a client is tax deductible? Or if you can claim the petrol you put in your personal car when using it for work? You're not alone!

If you’re a business owner who spends a lot of time on the road - or has a team that is out and about - those kilometers can translate into legitimate tax deductions that keep cash in your business. But only if you're tracking things properly.

At The Accounts Department, we see too many Kiwi business leaving money on the table because vehicle expense tracking seems too complicated. It doesn't have to be if you know the basics.

What Vehicle Expenses Can I Claim in New Zealand?

When it comes to what you can claim, you have two IRD-approved options:

Option 1: Kilometre Rate Method

This simplified method lets you claim based on a set rate per kilometer driven for business:

• First 14,000km: 83 cents per km (petrol/diesel)

• After 14,000km: 31 cents per km (petrol/diesel)

• Different rates apply for hybrid and electric vehicles

This covers all running costs—fuel, insurance, repairs, and depreciation. This method is simpler and works great for many businesses, especially if you don't rack up huge kilometers or have lower-cost vehicles.

OPTION 2: Actual Costs Method

With this method, you can claim the business percentage of your actual vehicle expenses, including:

• Fuel and oil

• Repairs and maintenance

• Insurance premiums

• Registration and WOF

• Depreciation

• Interest on vehicle loans

• Parking fees for business appointments

This needs better record-keeping but might result in bigger deductions depending on your situation. If you spend a lot of time on the road, have a newer or more expensive vehicle, or have higher running costs, this method could be significantly more beneficial. For example, if your logbook shows you use your vehicle 40% for business, you can claim 40% of these expenses.

The best choice really depends on your specific business circumstances—there's no one-size-fits-all answer here, which is why we always analyse both options for our clients.

Can I Use My Personal Car for Business in NZ?

Yes, absolutely! This is one of the most common questions we hear.

Using your personal vehicle for business purposes is completely legitimate in New Zealand. The key is being able to clearly identify which portion of your vehicle use is for business versus personal reasons.

This is where a vehicle logbook becomes your new best friend. Without it, you're essentially guessing at tax time - something the IRD isn't particularly fond of!

The 90-Day Logbook Rule

To legitimately claim vehicle expenses, the IRD requires businesses to maintain a logbook for at least a 90-day consecutive period to establish a pattern of business use. This becomes your baseline for claiming vehicle expenses for up to three years, provided your business usage patterns remain similar.

What must be recorded in this logbook?

• Date of each journey

• Start and end odometer readings for each trip

• Distance traveled

• Purpose of the journey (specific business reason)

• Total kilometers traveled during the period

• Calculation of business use percentage

Paper vs. Digital: Make It Easy on Yourself

Traditional paper log books work, but tech is making life so much easier.

Several apps and digital tools now make tracking mileage almost automatic:

• GPS-enabled mobile apps that record trips

• Cloud systems that integrate directly with Xero and MYOB

• Electronic logbooks that plug into your vehicle

Direct integrations with your accounting software eliminate double-handling of data and ensure your vehicle expenses flow seamlessly into your financial reporting.

Common Pitfalls That Trip Up Small Business Owners

1. Treating Regular Commuting as Business Travel

Your regular trip from home to your permanent workplace doesn't count as business travel. However, if you're visiting a client, supplier, or temporary workplace, that's generally deductible.

2. Using Vague Descriptions

Writing "business meeting" isn't specific enough for the IRD. Instead, record "Client meeting with ABC Company re: website project" or "Banking deposit at ANZ Queen Street branch."

3. Forgetting to Reset Your Tracking Every Three Years

Remember, your logbook needs to be updated at least every three years, or sooner if your business usage patterns change significantly.

Managing Team Vehicles: Special Challenges

If you have team members on the road:

• Establish one consistent system for everyone

• Schedule quick monthly reviews to ensure logs are maintained

• Embrace technology that makes it easy for everyone to comply

What Other Deductions Are You Missing?

Many businesses underclaim vehicle expenses simply because they don't track properly. Good record-keeping doesn't have to be complicated - it just needs to be consistent. Your future self (and your accountant) will thank you!

Need help reviewing all your deductions? Get in touch—we've got your back when it comes to keeping an eye on the bottom line.