Update - The following are the rates per kilometre that will apply for the 2017/18 income year:-
|First 14,000kms||After 14,000kms|
|Petrol or Diesel||76 cents||26 cents|
|Petrol Hybrid||76 cents||18 cents|
|Electric||76 cents||9 cents|
Inland Revenue has published ED0203. It sets out the proposed new rules for claiming vehicle expenses calculated on a mileage basis. These rules are to apply to the 2017 – 18 tax year.
If you make this election, you cannot change back to actual cost until the vehicle has been sold. A 3 months logbook is required in the usual way. In addition to keeping the logbook, the taxpayer must note the number of kilometres the vehicle has travelled during the financial year. Warn your clients to get a speedo reading at balance date in every year.
The first 14,000 km is described as being “Tier One” and the claim per kilometre is higher than it is for Tier 2 mileage.
The 5000 km limit has been abolished.
The kilometre rates will vary according to the cc capacity of the vehicle and whether it is petrol, diesel, hybrid or electric.
If you choose a mileage rate, remember to extract interest on money borrowed to purchase the vehicles from the interest account. It is no longer tax-deductible as the mileage rate covers this.
Shareholders in close companies can also use actual cost and apportion this as for a sole trader.
Fortunately, the FBT alternative, which saves everybody a lot of hassle, is still available.