Claiming business vehicle expenses is a great way to reduce your tax bill – and it doesn’t have to be a hassle to get right.
With Solo claiming vehicle expenses is easy and even a bit fun. All you need to do is enter what percentage of your vehicle use is business related and Solo will do all the math so you’re always claiming the correct amount.
So here’s some info to help you determine what percentage you can claim.
What percentage can you claim?
If you are a sole trader and your vehicle is only used for business. You can claim 100% of the running costs.
If not all your travel is business use then you can claim up to 25% of the vehicle running costs as a business expense by default, without needing to keep a logbook.
Most people guess their business percentage use if they feel it’s under 25%. But don’t just go with 25% if you think it’s actually substantially less as you could still be asked the justify the percentage claimed.
If your business use is over 25% IRD requires you to keep a logbook. This is a log of all your travel and you need to do this for 3 months (and update it after 3 years).
The logbook includes the distance, date and reason for the trip. At the end of the 3 months add up the distance that was travelled for business and compare it with the total distance the vehicle travelled over the 3 months. This determine the percentage of business use.
You can download a free logbook template from the IRD website or buy a logbook from your local stationary store to keep in you glovebox.
The big catch to watch out for with determining business use is that travel between work and home is not classed as business use. This isn’t a big deal if you work from home. But if you work from another location such as an office or workshop then you can’t claim your drive between home and that location.
What expenses can you claim?
If you own a vehicle that is used in your business, you can claim a portion of the vehicle running costs against your income and reduce your tax bill.
Running costs include:
- Registration & WOF
- Maintenance & Tyres
- Parking & Tolls – Only if they relate to a work trip and you can’t claim tickets or fines.
- Car Insurance
- Road User Charges
Simply select the appropriate category and Solo will work out the deduction amount, as well as the GST amount if you’re GST registered. Solo also provides hints on which expenses you can claim and even suggests claimable expenses directly from your transactions.
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