Vehicles & your business
One of the most common questions I get as an accountant - should my business own my vehicle? Should the business or I pay for the costs if I don’t own it or how do I reimburse myself? I will try and summarise the key things for you to consider so you can make an informed choice on what is right for you - like so many things accounting, there isn’t one right answer!
If a vehicle is solely used for business use, and not personally - it should be owned by your business and the business should pay for all associated vehicle costs.
However, if you use the vehicle personally as well as for business purposes, we’ve summarised some things to consider below.
SOLE TRADER
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Reimburse yourself for business mileage using IRD rates their rates cover fuel and vehicle maintenance costs. This can be ideal if you don’t do much business travel.
There are some great apps out there that help tracking mileage too! We are happy with a simple spreadsheet but if a paid app is up your alley, there are plenty of options.
What information is needed in a for claiming mileage?
We’d recommend including the following fields in your records:
Date of travel
KM on odometer at start of trip
KM on ondometer at end of trip
KM travelled
Purpose of trip
Please note that it must be a business trip; the IRD doesn’t consider driving to and from your home to your work premise a business trip.
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If you use your business vehicle for mostly business purposes, having you’re business purchase your car could be the answer; if you already own the car, you can have it valued by a car yard or third party to determine the value to use, and have your business purchase it from you personally.
This means you claim GST on the purchase price of your vehicle (the business portion only, not the personal portion).
A log book needs to be kept for a minimum of 90 days to determine business versus personal use; this is then turned into a percentage, which is used to calculate the portion of vehicle costs that can be claimed in your business.
Expenses claimed could be buying petrol, getting a Warrant of Fitness, paying for maintenance and insurance.
COMPANY
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Similar to a sole trader above, you can claim mileage for business travel done in a personal vehicle. Please refer to the above notes for the types of records you need to keep, to make such a claim.
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If a company owned vehicle is made available to employees or shareholders for personal use, fringe benefit tax may apply.
Fringe Benefit Tax is calculated as a percentage of the vehicle cost, and is based on the number of days the vehicle is available for personal use (regardless of whether it’s used personally). Fringe benefit tax is paid to the IRD.
If a shareholder is the only user of the vehicles, then this calculation can be done as part of your end of year accounts. If employees use business vehicles, then FBT returns may need to be filed and paid to the IRD quarterly.
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Not all company owned vehicles are subject to fringe benefit tax. There are 4 criteria to be met which are:
The vehicle is not a car
The vehicle is has prominent and permanent displays of the business on the vehicle - ie stickers or logos, branded features etc
andIs not available for the shareholder or employee’s private use, except for private use that is travel to and from their home that is necessary in, and a condition of, their employment; or other travel in the course of their employment during which the travel arises incidentally to the business use.
Typical vehicles that are not subject to fringe benefit tax include vans or single cab utes that are fully kitted out in the back and don’t have the ability to transport passengers, plus heavy trucks and machinery. There are exceptions to these rules, so get guidance from your accountant if you aren’t sure where your vehicle sits.
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Disclaimer: this is general information only. Please reach out to Prosper Business for specific advice to your situation.