Motor vehicle expenses, logbooks and shareholder-employee vehicles in New Zealand

Scope

This Guide covers how a New Zealand business claims the cost of a motor vehicle that is used for both business and private travel. It is written for the 2026-27 tax year (1 April 2026 to 31 March 2027), with a dated section for 2025-26 returns, which are the ones being filed now.

It covers sole traders, partners and companies (including close companies with shareholder-employees): actual costs with a logbook versus Inland Revenue's (IRD's) kilometre rates, the no-logbook limit, depreciation, GST, and how fringe benefit tax (FBT) applies to company vehicles.

It does not cover: working out the FBT payable (the FBT rates and the return itself), an employer paying an employee for using the employee's own car (IRD's OS 19/04B), charities, or vehicles held as trading stock.

Who pays FBT and who adjusts instead. IRD says: "If you're a sole trader or a partner of a partnership, you do not pay FBT on business vehicles that you use privately. Instead, you can keep a logbook and make adjustments for private use in your income tax and GST returns" (IRD: motor vehicles and FBT). A company that makes a vehicle available to an employee, including a shareholder-employee, pays FBT for "every day that a motor vehicle is available for an employee's private use, even if they do not actually use it", unless an exemption applies or a close company opts out (same page).

Home to work is private. IRD: "Travelling from home to work is a personal trip" (IRD: vehicle expenses).

Ask the client first

• Who owns the vehicle: the individual, the partnership, a company or a trust? Whose name is it registered in? Is it owned outright, on hire purchase or leased?
• Is it used only for business? If so, IRD allows the full running costs (IRD: vehicle expenses) and most of this Guide is not needed.
• What does it run on: petrol, diesel, hybrid, electric, or something else? Anything else must use actual costs.
• Which method has been used for this vehicle in earlier years (kilometre rates or actual costs)? IRD requires one method for as long as the vehicle is owned.
• Has a logbook been kept? For how many consecutive days, when did the test period end, and has business use changed since by more than 20% (IRD: use a logbook)?
• Total kilometres for the year (odometer at the start and end of the income year) and business kilometres.
• For actual costs: fuel or charging, road user charges, registration, insurance, Warrant of Fitness, repairs, tyres, parking, finance interest, and the vehicle's cost, the date it was bought and whether it was new or new to New Zealand.
• Is the business GST-registered? What did the vehicle cost excluding GST, and how was GST claimed when it was bought?
• For a company: how many vehicles can shareholder-employees use privately? Does the company give any other fringe benefit? Is it registered for FBT, and how often does it file?
• Was an FBT opt-out already made for this vehicle, and was it made by the due date for the return of the year the vehicle was bought or first used for business?
• Is the vehicle a ute, van or other goods vehicle with permanent signage (possible work-related vehicle exemption)?

The method, step by step

1. Decide the regime from the owner. A sole trader or partnership claims the business share of the vehicle and makes private use adjustments in income tax and GST; no FBT (IRD: motor vehicles and FBT). A company that lets an employee or shareholder-employee use a vehicle privately is in the FBT rules (step 8) unless it is a close company that validly opts out (step 9).
2. Check the fuel type. IRD: "If your vehicle is petrol, diesel, hybrid or electric you can use either method. You need to continue to use 1 method for as long as you own the vehicle. If your vehicle isn't petrol, diesel, hybrid or electric then you must use the actual costs method" (IRD: vehicle expenses). Before choosing, check which method was used in earlier years for this vehicle and stay with it.
3. Find the business share. Either keep a logbook or accept the no-logbook limit.
   • Logbook: keep it "for at least 90 consecutive days", recording the start date and odometer reading, "the date, distance and reason for each business journey", and the end date and odometer reading. Add up business distance and work out its proportion of total distance (IRD: use a logbook).
   • The result "can be used for up to 3 years if the proportion of business use doesn't change by more than 20%. After 3 years you will need to keep a logbook for another 90 days" (IRD: use a logbook). If use changes by more than 20%, start a new logbook.
   • No logbook: "The claim will be limited to 25% of the vehicle running costs as a business expense. However, you may be asked to substantiate the percentage claimed" (IRD: vehicle expenses).
4. Actual cost method. Apply the business share to all vehicle costs, "things like buying petrol, getting a Warrant of Fitness, paying for maintenance and repairs, insurance and parking" (IRD: use a logbook). Records must "show the reasons for all business travel, and the distances of all journeys". Add depreciation on the business share: "You can also claim a deduction on any depreciation loss for the business use of your vehicle" (IRD: vehicle expenses). See step 6.
5. Kilometre rate method. Multiply business kilometres by IRD's rate for the income year being claimed ("Use the rates for the year you're claiming", IRD: vehicle expenses).
   • Tier 1 covers "the business portion of the first 14,000 kilometres travelled by the vehicle in an income year. This includes private use travel." Tier 2 is "for running costs only" and applies to the business portion "when overall vehicle travel (both business and private) exceeds 14,000 kilometres" (IRD: kilometre rates 2025-2026).
   • So: Tier 1 kilometres = business share x the smaller of total kilometres and 14,000; Tier 2 kilometres = business share x total kilometres above 14,000.
   • "Kilometre rates include depreciation. If you use this method, you will not claim a separate depreciation deduction or recovery of depreciation for the vehicle" (IRD: vehicle expenses).
   • The rates for a year are published only after that year ends (see "Figures, by year").
6. Depreciation (actual cost method only). Depreciate the vehicle at IRD's general rate, then deduct the business share. For a GST-registered business the depreciation base is the price "less the GST charged"; if not registered, it is "the total price of the asset, including GST" (IRD: claiming depreciation). A new (or new to New Zealand) vehicle first available on or after 22 May 2025 may qualify for Investment Boost (see the figures). On sale, a gain above adjusted tax value is income, and for a vehicle with private use "you must divide any losses or gains between those uses, in proportion to their use" (IRD: managing depreciation).
7. GST. If GST-registered, claim GST on the purchase and running costs to the extent of business use, and adjust later if use changes (see the GST rows in the boundary table). IRD: "You can calculate a private use adjustment for a vehicle by keeping a logbook and comparing private kilometres travelled with total kilometres travelled" (IRD: GST adjustments). For the kilometre method IRD says only: "When self-employed people use kilometre rates, they do not need to consider GST" (IRD: vehicle expenses). IRD's pages do not spell out how GST on the purchase price works alongside the kilometre method. Our reading is that input tax should not also be claimed on running costs the rate already covers; treat this as "check", and refer if the client claimed GST on the purchase and now wants the kilometre method.
8. Company vehicles under FBT. The company pays FBT on each day the vehicle is available for private use. IRD's close-company page treats FBT and private use adjustments as alternatives: a company that opts out of FBT "must make private use adjustments for income tax and GST" instead (IRD: close companies and FBT). Test the exemptions first (work-related vehicle, emergency call-outs, business travel, unavailable days) using IRD: FBT exemptions for motor vehicles. Value the vehicle by cost price or tax book value, and apply the percentage for the return frequency (IRD: calculating taxable value). A close company may also elect to file income-year FBT returns (see the figures).
9. Close company opt-out. A close company with "only 1 or 2 motor vehicles available for private use of shareholder-employees" that does "not provide any other fringe benefits" can opt out and "use the income tax rules for vehicle expenditure instead", making "private use adjustments for income tax and GST" (IRD: close companies and FBT). Tell IRD by "sending us a message in myIR" or "including a note with your paper return". The election "is only valid if it's made by the due date for filing the income tax return in the year a vehicle is acquired or first used for business". After that the company "cannot return to using the FBT rules for that vehicle unless the vehicle is disposed of, or you stop using the vehicle for business use". Cancel any FBT registration if the election is in time. Then apply steps 2 to 7 to the vehicle.

Figures, by year

2026-27 tax year (1 April 2026 to 31 March 2027)

Kilometre rates for 2026-27 are not published. IRD: "We publish the kilometre rates after each tax year ends on 31 March. We usually publish the rates for the tax year just ended by May" (IRD: vehicle expenses). Do not use the 2025-26 rates for a 2026-27 claim; wait for IRD's 2026-27 page. The 2025-26 rates are shown below only for 2025-26 returns.

Rule	2026-27 position	Source
Logbook test period	at least 90 consecutive days	IRD: use a logbook
How long a logbook result lasts	up to 3 years, only if business use does not change by more than 20%	IRD: use a logbook
No logbook kept	claim limited to 25% of running costs; IRD may ask you to substantiate	IRD: vehicle expenses
Kilometre band for Tier 1	business share of the first 14,000 km in the income year, private km included	IRD: kilometre rates 2025-2026
Kilometre rates per km	not yet published for 2026-27	IRD: vehicle expenses

Depreciation (IRD General depreciation rates IR265, March 2026, and IRD depreciation pages):

Item	Rate or amount	Source
Motor vehicles for transporting people, up to 12 seats (cars)	30% diminishing value, 21% straight line (5-year life)	IRD: IR265 March 2026
Class NA light goods vehicles (gross vehicle mass up to 3.5 tonnes, for example many utes and vans)	20% diminishing value, 13.5% straight line	IRD: IR265 March 2026
Investment Boost on a new (or new to New Zealand) vehicle first available on or after 22 May 2025	20% of cost as an expense, then depreciation on the remaining 80%	IRD: claiming depreciation

A second-hand vehicle bought in New Zealand is not new, so it does not qualify for Investment Boost. How Investment Boost interacts with a private-use apportionment is not set out on the IRD pages used here: check before claiming it on a mixed-use vehicle.

FBT on company vehicles, from 1 April 2026 (IRD: calculating taxable value; IRD: ways to value):

Valuation basis	Income-year return	Quarterly or annual return (per quarter)	Source
Cost price, including GST	20%	5%	IRD: calculating taxable value
Cost price, excluding GST	23%	5.75%	same page
Tax book value, including GST	36%	9%	same page
Tax book value, excluding GST	41.40%	10.35%	same page
Tax book value with Investment Boost, including GST	41.40%	10.35%	same page
Tax book value with Investment Boost, excluding GST	47.61%	11.90%	same page
Minimum tax book value	$8,333 (no Investment Boost) or $7,317 (Investment Boost claimed)		IRD: ways to value

• Income-year formula: "(Private use days × cost price or tax book value ÷ 365) × percentage". Quarterly: the same over 90, with private use days capped at 90 (IRD: calculating taxable value).
• Once chosen, the valuation method stays until the vehicle is sold, the lease ends, or "5 years after the start of the period of the 1st return for that vehicle" (IRD: ways to value). Cost price excludes annual relicensing, financing and trade-in reductions.
• Employee contributions reduce the taxable value; if the employee pays in full there is no FBT, but the nil value must still be recorded (calculating taxable value page).

Close company elections (IRD: close companies and FBT):

Rule	Detail	Source
Income-year FBT returns: who qualifies	a close company giving fringe benefits to shareholder-employees where, in the previous income year, gross PAYE (excluding ACC earners' levy) and ESCT were no more than $1,000,000, or it only gave 1 or 2 vehicles to shareholder-employees, or it was not an employer	IRD: close companies and FBT
Election deadline	existing employer: last day of the 1st FBT quarter of the income year; new employer: last day of the quarter it started employing. No late elections	same page
Income-year return due date	same as the company's end-of-year income tax payment due date	same page
Opt-out conditions and deadline	1 or 2 vehicles, no other fringe benefits; by the income tax return due date for the year the vehicle is acquired or first used for business	same page

2025-26 income year (1 April 2025 to 31 March 2026): returns being filed now

The kilometre rates for 2025-26 are set by the Income Tax (Kilometre Rates for the Business Use of Vehicles for the 2025-26 income year) Instrument 2026, made under section DE 12(4) of the Income Tax Act 2007 on 2 June 2026 and in force from 4 June 2026 (IRD Tax Technical: OS 19/04 (KM 2026)). IRD's summary page gives the same rates (IRD: kilometre rates 2025-2026).

Vehicle type	Tier 1 rate per km (business share of first 14,000 km)	Tier 2 rate per km (business share above 14,000 km)	Source
Petrol	$1.20	$0.37	IRD Tax Technical: OS 19/04 (KM 2026)
Diesel	$1.30	$0.38	same instrument
Petrol hybrid	$0.90	$0.24	same instrument
Electric	$1.22	$0.23	same instrument

• These rates apply only to the 2025-26 income year; earlier years have their own IRD pages.
• The logbook, no-logbook, depreciation, GST and close-company rules in the 2026-27 tables above also applied in 2025-26.
• IRD: "From 1 April 2026, new fringe benefit valuation rates apply to vehicles if you have claimed Investment Boost on them" (IRD: ways to value); the rates are the "Tax book value % with Investment Boost" columns on IRD: calculating taxable value. For FBT periods before that date, refer.

Boundaries and exceptions

Situation	Treatment	Source
Switching between kilometre rates and actual costs	not allowed while the vehicle is owned ("continue to use 1 method")	IRD: vehicle expenses
Logbook older than 3 years, or business use changed by more than 20%	keep a new 90-day logbook	IRD: use a logbook
Car parking	treated like other vehicle costs: deductible to the extent incurred in producing assessable income	IRD: vehicle expenses
GST: vehicle costing $10,000 or less excluding GST	principal purpose method (all or nothing) or apportionment method; apportionment must then be used for all such purchases for at least 24 months	IRD: GST adjustments
GST: vehicle costing over $10,000 excluding GST	claim GST by the business-use percentage, using a fair and reasonable method such as a logbook	IRD: GST adjustments
GST: later change in use	adjustment periods by GST-exclusive cost: up to $10,000 none; $10,001 to $20,000 two; $20,001 to $500,000 five; over $500,000 ten. No adjustment is needed if "the value of the adjustment is less than $1,000 and the change in taxable use is less than 10%"	IRD: change-in-use adjustments
GST: selling a vehicle on which less than full GST was claimed	final adjustment: tax fraction x consideration x (1 minus previous business use); the tax fraction is 15% of the GST-exclusive amount or 3/23 of the GST-inclusive amount	IRD: change-in-use adjustments
GST: vehicle bought mainly for private use, no GST claimed	can elect to treat it as a non-taxable supply, so no GST on a later sale, but only if no past GST deduction was claimed (other than non-integral deductions), it was not acquired or used mainly to make taxable supplies, and it was not acquired as a zero-rated supply	IRD: GST adjustments
FBT: work-related vehicle	exempt only if all conditions are met, including gross laden weight of 3,500 kg or less, permanent business signage (not magnetic), written notice to employees, and a vehicle mainly designed to carry goods; not exempt on any day it is available for private use, such as weekends	IRD: FBT exemptions
FBT: emergency call-outs	whole day exempt when the employee actually attends a qualifying call-out between 6pm and 6am in the work week, or any time at weekends and on public holidays; stand-by alone does not count	IRD: FBT exemptions
FBT: business travel	exempt where the trip is a continuous period of at least 24 hours, the vehicle is needed for the duties, and the employee is away from home with the vehicle	IRD: FBT exemptions
FBT: vehicle unavailable (for example in for repair)	no benefit if unavailable for at least 24 hours and a valid reason is recorded	IRD: FBT exemptions
FBT: day length	a fringe benefit day runs 24 hours from midnight; a different start time can be elected and lasts at least 2 income years	IRD: motor vehicles and FBT
FBT: 3-month test period	may replace recording each exempt day; results used for the next 3 years; must be repeated every 3 years or until the vehicle is disposed of	IRD: motor vehicles and FBT
FBT: company uses a vehicle owned by the (shareholder-)employee under an arrangement	"FBT applies when the vehicle is available for private use by the employee"; any suspension clause (such as limiting use to set hours) is ignored; no FBT if never available for private use	IRD: motor vehicles and FBT

Worked cases

The people and amounts are made up. Rates come from the sources linked in each table.

Case 1: sole trader, petrol car, kilometre rates, 2025-26 return. Aroha drove 18,000 km in 2025-26. Her 90-day logbook (kept in 2024) shows 60% business use and her use has not changed by more than 20%, so it is still valid (IRD: use a logbook).

Step	Working	Source
Tier 1 km	60% x 14,000 = 8,400 km	IRD: kilometre rates 2025-2026
Tier 2 km	60% x (18,000 minus 14,000) = 2,400 km	same page
Tier 1 claim	8,400 x $1.20 = $10,080	IRD Tax Technical: OS 19/04 (KM 2026)
Tier 2 claim	2,400 x $0.37 = $888	same instrument
Deduction	$10,968, with no separate depreciation	IRD: vehicle expenses

For 2026-27 she must wait for IRD's 2026-27 rates before she can finish the calculation.

Case 2: no logbook, 2026-27. Ben, a sole trader, has no logbook. His 2026-27 running costs are $6,400 (IRD: vehicle expenses).

Step	Working	Source
Limit	25% of running costs	IRD: vehicle expenses
Deduction	25% x $6,400 = $1,600	same page

If Ben believes his business use is higher, he needs a logbook of at least 90 consecutive days to support it.

Case 3: electric car, kilometre rates, 2025-26 return. Mere drove 9,000 km, with 70% business use from a current logbook (IRD: use a logbook).

Step	Working	Source
All km are within the first 14,000	70% x 9,000 = 6,300 km at Tier 1	IRD: kilometre rates 2025-2026
Deduction	6,300 x $1.22 = $7,686	IRD Tax Technical: OS 19/04 (KM 2026)

Case 4: actual costs and depreciation, not GST-registered, 2026-27. Sam bought a second-hand car on 1 April 2026 for $23,000 including GST and owns it for the whole 2026-27 income year. His logbook shows 65% business use. It was bought second-hand in New Zealand, so no Investment Boost (IRD: what you can claim with Investment Boost).

Step	Working	Source
Depreciation base	not GST-registered, so the full price including GST: $23,000	IRD: claiming depreciation
Depreciation for the year	30% diminishing value x $23,000 = $6,900	IRD: IR265 March 2026
Business share	65% x $6,900 = $4,485	IRD: vehicle expenses
Running costs	65% of fuel, insurance, Warrant of Fitness, repairs and parking	IRD: use a logbook

Case 5: GST on buying and selling, GST-registered. Lena buys a car for $34,500 including $4,500 GST ($30,000 excluding GST). Her logbook supports 60% business use (IRD: GST adjustments).

Step	Working	Source
Method	over $10,000 excluding GST, so claim by business-use percentage	IRD: GST adjustments
GST claimed	60% x $4,500 = $2,700	same page
Adjustment periods	cost is in the $20,001 to $500,000 band: 5	IRD: change-in-use adjustments
Later sale for $23,000 including GST, previous use 60%	3/23 x $23,000 x (1 minus 0.6) = $1,200 final adjustment in her favour	same page

Case 6: close company car under FBT, income-year return. Kōwhai Ltd provides one car, bought new for $57,500 including GST, to its shareholder-employee. It is available for private use on all 365 days, no exemption applies, and the company files income-year FBT returns on cost price including GST (IRD: calculating taxable value).

Step	Working	Source
Formula	(private use days x cost price ÷ 365) x percentage	IRD: calculating taxable value
Taxable value	(365 x $57,500 ÷ 365) x 20% = $11,500	same page
FBT payable	apply the FBT rate to the taxable value: outside this Guide, refer

Had Kōwhai Ltd opted out in time, it would instead claim only the business share of the car's costs and GST, using a logbook (method steps 2 to 7).

Case 7: opt-out not available. Tui Ltd lets its two shareholder-employees use one car each and also gives one of them a low-interest loan. The loan is another fringe benefit, so the company cannot opt out of FBT for the cars (IRD: close companies and FBT).

When to refuse or refer

• A 2026-27 kilometre-rate claim before IRD publishes the 2026-27 rates. Do not substitute the 2025-26 rates.
• Working out the FBT payable: FBT rates, the multi-rate or alternate-rate options, and filling in FBT returns.
• A client who wants to switch between kilometre rates and actual costs on the same vehicle, or who claimed GST on the purchase and now wants the kilometre method.
• Investment Boost on a vehicle with private use, or on a vehicle whose "new" status is unclear (imported, demonstrator, ex-trading stock).
• FBT periods before 1 April 2026 where Investment Boost was claimed.
• A late opt-out election, or a company wanting to go back into FBT for an opted-out vehicle while it still owns and uses it.
• Employer reimbursement of an employee's own vehicle (IRD's OS 19/04B), and any vehicle held as trading stock or pooled.
• Charities, and businesses outside charitable purposes run by a charity.
• Disputes over whether a vehicle meets the work-related vehicle test, and vehicles over 3,500 kg gross laden weight, which IRD treats as unclassified benefits (IRD: FBT exemptions).
• A leased vehicle (operating or finance lease) or one bought on hire purchase: how the lease payments or instalments are deducted, and who depreciates the vehicle, is outside this Guide. A lessee under an operating lease does not own the vehicle and cannot use the depreciation steps here; refer.
• Any IRD review, audit or dispute about the business-use percentage.

Filing and payment

• Sole traders and partners: the vehicle claim goes into the income tax return for the year (for individuals, the IR3; see the separate OpenAccountants Guide on the IR3 for due dates). GST adjustments go into the GST return for the period.
• Companies under FBT: file FBT returns at the chosen frequency. For a close company on income-year returns, the return period matches its income tax return period and "the due date for filing and paying FBT is the same as your company's end of year income tax payment due date"; a weekend or public holiday moves it to the next working day (IRD: close companies and FBT).
• Elections: income-year FBT election in myIR (or in writing) by the last day of the first FBT quarter; opt-out by myIR message or a note with a paper return, by the income tax return due date for the year the vehicle is acquired or first used for business (same page).
• Records: keep the logbook and vehicle cost records. IRD requires depreciation records (purchase value, depreciation each year, adjusted tax value and depreciation recovered on sale) for at least 7 years (IRD: managing depreciation).
• Sale of the vehicle: under actual costs, report any depreciation gain or loss in the year of sale, split between business and private use; no depreciation is claimed in the year of disposal (same page). Under kilometre rates there is no separate depreciation recovery. Make any GST final adjustment in the GST return for the period of sale.

Completion checklist

• Owner identified; regime chosen (private use adjustment, FBT, or close company opt-out).
• Fuel type confirmed; method matches the one used in earlier years for this vehicle.
• Logbook covers at least 90 consecutive days, is less than 3 years old, and business use has not moved by more than 20%; or the 25% no-logbook limit is applied (IRD: vehicle expenses).
• Kilometre rates used are for the income year being claimed; for 2026-27, IRD's rates have been published.
• Tier 1 applied to the business share of the first 14,000 km only; Tier 2 to the business share of the rest.
• No separate depreciation claimed under kilometre rates.
• Under actual costs: depreciation rate from IR265, correct GST-inclusive or exclusive base, business share applied, Investment Boost only for a new vehicle.
• GST claimed by business share; adjustment periods noted; change-in-use and sale adjustments diarised.
• For FBT: exemptions tested, valuation basis and percentage match the return frequency and GST basis, minimum tax book value checked.
• For an opt-out: 1 or 2 vehicles only, no other fringe benefits, election made in time, FBT registration cancelled if needed.
• Records kept for at least 7 years.