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New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Motor vehicle expenditure

DE 4: Default method for calculating proportion of business use

You could also call this:

“How to calculate business use of a vehicle without detailed records”

This part of the law explains what happens when you use a motor vehicle for both business and personal reasons, but you haven’t kept records of how much you use it for business. It applies when you haven’t used a logbook to show how much you use the vehicle for business, and you haven’t chosen to use the kilometre rate method.

In this case, you can claim a deduction for your vehicle expenses. The amount you can claim is the smaller of two options:

  1. The actual percentage of time you used the vehicle for business purposes.
  2. 25% of the total time you used the vehicle.

This means that even if you don’t have exact records, you can still claim some of your vehicle costs as a business expense. But the law limits how much you can claim to make sure it’s fair.

If you want to claim more than this, you would need to keep better records of your business use or use one of the other methods mentioned in section DE 2.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513861.

Topics:
Money and consumer rights > Taxes
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DE 3: Methods for calculating proportion of business use, or

“How to work out the business portion of your car use”

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DE 5: Actual records, or

“Keeping detailed records of business vehicle use”

Part D Deductions
Motor vehicle expenditure

DE 4Default method for calculating proportion of business use

  1. This section applies when—

  2. a person has not maintained actual records to show the proportion of business use of a motor vehicle; and
    1. a period is not a term to which a proportion of business use of a motor vehicle established by a logbook applies; and
      1. the person has not elected to use the kilometre rate method for the motor vehicle.

        1. The deduction under section DE 2 for expenditure or loss incurred is limited to the lesser of—

        2. the proportion of actual business use of the vehicle; and
          1. 25% of the total use of the vehicle.

            Compare
            Notes
            • Section DE 4(1)(a): amended, on , by section 59(1) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).
            • Section DE 4(1)(b): amended, on , by section 59(2) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).
            • Section DE 4(1)(c): replaced, on (applying for the 2017–18 and later income years), by section 76(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).