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Motor Vehicle – Business Expense Guideline
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Motor vehicle is an integral part of any business, and the motor vehicle expense for a small business can be between $5000 to $8,000 per annum thus record keeping and tax rules adherence becomes important.
Things to know about your motor vehicle-
1. The ownership- do you own the vehicle, this is not the ownership shown in land transport records, the ownership is determined by sale and purchase agreement of your motor vehicle. Instead of owning the vehicle many business lease the motor vehicle, generally there are two types of lease – Finance Lease and Operating lease
a. Finance lease is like your home loan, you pay regular payments for certain period of time and then the ownership is transferred to you.
b. Operating lease is like renting a car, you would use it for certain time and when the lease expires the vehicle is returned back to the owner.
2. Expense deduction- general assumption is if this is companies vehicle all expenses related to the vehicle are deductible expenses, which is correct but you also need to ensure there is no private usage attached to your vehicle otherwise Fringe Benefit rules will kicks off
3. Business usage- IRD has stipulated four points to ensure the vehicle is business related vehicle:
a. The principle design of the vehicle is not for carrying passenger, which means vehicles rear seats are welded down or not in usable condition to carry passengers
b. The exterior of the vehicle permanently or prominently display the business name
c. If you have given this vehicle to your employee or if you are an employee of the company, instructions must have been issued to the employee mentioning the vehicle is not available for private use. Which means if you a sole director and shareholder of the company you would write a letter to yourself
d. As an employer you also need to make some checks to ensure your employees are following the instructions and not using your vehicle for private usage.
4. Fringe Benefit Tax- is vehicle is available for private use, regardless of you use it or not Fringe Benefit rules kicks off, however there is an exemption of $1200 per year for you but this exemption is not available to save FBT on motor vehicle usage. However, if you pay the taxable benefit back to the company then no Fringe Benefit Tax will apply.
5. Log Book- many business also follow this approach, which is based on record keeping of your usage. This approach can be time consuming but it’s worth it. How it works every time you use your car just write in a note book date of travel, traveling to and from, reason of travel, odometer start, odometer end, and distance travelled. You can keep this log book and end of the year multiply kilometre by $0.77 cents(tax year 2013), and use this as your business expense
Any further query related to your motor vehicle expense please contact IBBZ Accounting
Saurav Wadhwa is a Principal Accountant at IBBZ Accounting Limited
M Bus (TAX) PG Cert (LAW) CA CPA
Membership and Qualification:
- Masters in Professional Business Studies (Taxation) with Distinction from Auckland University of Technology
- Post Graduate Certificate in LAW, Law School at Auckland University of Technology
- Chartered Accountant(CA), New Zealand Institute of Chartered Accountants (NZICA)
- Certified Practicing Accountant(CPA), CPA Australia
- Bachelor of Commerce, Grad. Cert. in Business from Auckland University of Technology
Saurav has many years of practical experience in tax & accounting services and is the co-founder of IBBZ Accounting Limited. He is qualified both in law and accounting. Saurav has worked in various tax & accounting specialist roles for large corporates in New Zealand. He loves to work with Small Businesses.
His key focus is on:
- Tax advisory for small and family operated businesses on a wide range of taxation issues.
- Legitimate tax saving structures.
- Advising on range of new business issues.
- Ensuring business growth is attained.
- Effective cash flow planning.
Saurav specialises in Tax Disputes resolution, Tax Relief applications, Tax Debt resolution/management, and representation in Tax Audit. Saurav can represent you in Taxation Review Authority, in Tax Dispute Court Cases or he can represent you during Tax Audit Investigations.
Blend of skills in Tax laws and accounting, makes him perfect advisor for small businesses and individuals like you. Saurav understands how to safeguard your business from creditors risk, maximise the business growth and pay low taxes. He can be your good strategic and business partner. He is of a friendly nature and easily approachable.
Saurav understands the numbers very well. He is a qualified Chartered Accountant and registered with highest professional accounting bodies of Australia and New Zealand. He can help you to plan for the future to satisfy all your financial needs.
Consumed by a hunger for knowledge, Saurav has never stopped furthering his education or expanding his pool of knowledge. Nothing gives Saurav more satisfaction than assisting his clients to achieve their financial goals. His diligence, passion and accuracy has earned him a reputation as a reliable professional who strives to serve his clients above and beyond the call of his duties.
Saurav was nominated for the Best Accountant of the year and the Young Entrepreneur of the year, and his company IBBZ Accounting won the award of Best Small Business 2014. In 2015 Saurav won the award of Best Accountant of the Year.
In 2017 Saurav was appointed as a committee member to New Zealand Public Practice Board of CPA Australia.
Saurav is a dedicated family man. Saurav is very fond of outdoor activities and enjoys pretty much all outdoor activities: running, bike, motorbike, snorkel, fishing, skiing etc. Saurav, is also a self-confessed workaholic, spends some of his free time thinking about his client’s affairs and forecasting their financial future.
He can be contacted on saurav@ibbz.co.nz or 09 272 8050
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