EXPENSES • 5 JUNE 2025 • 6 MIN READ

What motor vehicle expenses can I claim for my business?

Lineup of cars representing business vehicle expense claims

SECTIONS

Motor vehicles for sole traders and partnerships

Motor vehicles for company structures

GST, loans and leasing FAQs

Is it smarter to borrow to purchase a vehicle, or lease instead?

Who are Beany?

Here’s the deal. Everyone is trying to make the most of their ability to record their personal vehicle use as a business expense, and in response, the IRD is doing their best to minimise the eligible criteria.

When you’re a client of ours, you won’t have to worry too much as we make sure you always claim the right amount. But regardless, let’s explore how motor vehicle expenses work.

Motor vehicles for sole traders and partnerships

If your vehicle is used solely for business purposes, all motor vehicle expenses (e.g. fuel, maintenance, servicing, insurance, WOFs, replacement tyres, and similar) can be claimed as expenses.

Business purposes doesn’t include school drop-offs, going to the supermarket, or even travelling between home and work. The only possible exception here is when your home also acts as your office.

When a sole trader or partnership also chooses to use a business vehicle privately, the costs need to be separated.

Keep a logbook

A logbook records all travel over 90 days. It notes the distance, date and reason for each trip. This information can then be used to understand the proportion of use allocated to the business, and we can choose one of two methods:

For the first 14,000km travelled, claim $1.04 per business kilometre. A lower rate gets applied to additional kilometres (and is different for diesel, petrol hybrid and electric cars)
Apply the percentage of business travel to all vehicle expenses incurred i.e. if it’s 70% of the time, 70% of a WOF or a service can be claimed as a business expense

Assuming your travel habits don’t change significantly, your logbook can be valid for up to three years.

There’s also some good news about logbooks. While you can still find a template on the IRD’s website, you can digitise the whole process with an app to save time. You may want to check out Driversnote or similar apps.

No logbook

If you don’t intend to keep a logbook, you have two more options.

1. Claim up to 25% of all vehicle expenses. The IRD may ask you to justify whatever percentage you opt for.

2. Claim $1.04 per kilometre for up to 3,500km, and then a lower rate for additional kilometres. You’ll still need to track your business travel, but without as much detail as in a logbook.

Motor vehicles for company structures

In addition to the methods mentioned above, companies have another option. Here’s how the 'Motor Vehicle Reimbursement' (also known as FBT Reimbursement) works.

First off, if the vehicle was purchased from a third party, it is recorded at its purchase price. However, if purchased from a related party (e.g. yourself as shareholder, your mother, aunt, mate), then you need to work out the market value. The easiest way is to look on Auto Trader or TradeMe Motors for a vehicle with the same year, make and model, and similar condition. We can use the advertised price as its market value.

If a shareholder decides to use the vehicle for private use, this benefit they’re receiving must be recorded in the company’s financial statements. We call it a benefit that the shareholder is receiving, because they don’t need to purchase a car, and the company is paying for their vehicle expenses.

Reimbursing the company for this benefit

We calculate the reimbursement based on the vehicle’s value when it was brought into the company, and the number of days it’s available* for private use. The reimbursement is then recorded as a separate income line in the company’s financial statements (it’s considered income because the company is receiving compensation from the shareholder).

*Availability for private use: shareholders reimburse the company for any day that the vehicle is 'available' to them, which includes when it sits on their driveway (and not just when it was used privately).

Exceptions to this rule are:

A vehicle serving a specific function, which cannot take passengers
The vehicle shows prominent branding that can’t easily be removed
A shareholder having a second or third vehicle to use privately
The company says, in writing, that the vehicle cannot be used privately

What makes FBT Reimbursement optimal?

The company doesn’t need to file FBT returns to the IRD
No cash changes hands. The amount is calculated and then adjusted when it’s time to prepare financial statements

An important note is that FBT Reimbursement doesn’t apply to non-shareholder employees. Their benefit falls under the Fringe Benefits Tax (FBT) regime and is accounted for separately.

GST, loans and leasing FAQs

Can I claim GST on a personal vehicle that I use for business?

Yes, you can.

If you’re a sole trader, you can record the vehicle as a business asset. GST can be claimed on its market value at the time the vehicle is introduced to the business
Your company can purchase your personal vehicle at market value, and the GST is claimed when transferred.

No cash needs to change hands, just let your accountant know and they can enter the info into your accounting software for your next GST return. Just be aware that your accountant will make an adjustment for the private portion of expenses at the end of the financial year.

How much GST can I claim if I borrow to buy a vehicle?

You can claim all of it up-front. In fact, some lenders will require that you use your GST refund to repay part of the loan.

The easiest way to process this is to provide your accountant with the sale and purchase agreement and your financing arrangement, and they'll ensure it's recorded correctly for your next GST return.

Are my loan repayments a business expense?

No, they aren’t. The payments are going towards reducing your loan balance. However, the interest on the loan can be claimed for business purposes. Your accountant makes this adjustment when they prepare your financial statements.

What happens when I sell a business vehicle?

If you’ve claimed GST on the purchase price, you need to declare it on the sale price
If the sale is to yourself or a related party, you’ll need to know its market value (you’re not allowed to sell it to yourself for $1)
Tax must be paid on any profit from the sale
Your asset needs to be removed from the fixed asset register (please leave this to your accountant)

If the proceeds from the sale don't go through your Xero-connected bank account, you just need to provide your accountant with the sale price and they'll handle it from there.

Is it smarter to borrow to purchase a vehicle, or lease instead?

It depends.

If you borrow:

The vehicle belongs to you or the company, assuming you meet the loan conditions
GST can be claimed on the full purchase price
It’s an asset, and we will depreciate it as an expense over a number of years
The loan repayments are not deductible, but the interest portion is

When leasing a vehicle:

In nearly all cases, the vehicle doesn’t belong to you or the company
It’s not a business asset, so we can’t depreciate it
You can claim GST on each payment
The lease payments are fully tax-deductible
When the lease expires, you will have to return the vehicle

Here’s when we often get the follow-up question: 'What is my best option for tax purposes?'

That’s one we can’t answer. It’s more of a business decision and it depends on your cash flow, cost of the vehicle, available finance and personal preferences.

Who are Beany?

Beany are accountants for ambitious businesses, delivering big firm expertise without the big cost. We handle everything accounting-related (such as annual compliance, bookkeeping, financial insights and strategy), and help business owners make smarter decisions for their business and lifestyle through our responsive, friendly expertise. Book a call or get in touch if you want to discuss your business and see how we can help.