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DE 11: Replacement vehicles
or “How to handle a replacement vehicle for business use calculations”
You could also call this:

“How to calculate tax deductions for business use of your car”

You can use the kilometre rate method to calculate a deduction for using your car for business. To use this method, you need to have chosen it when you filed your taxes.

The amount you can deduct is worked out using a formula. You multiply the kilometre rate by the number of kilometres you’ve driven, and then multiply that by the portion of time you use your car for business.

The kilometre rate is set by the Commissioner of Inland Revenue. The kilometres travelled is the total distance your car has gone for both business and personal use. The business proportion is how much you use your car for work, shown as a decimal.

You can find out how to calculate the business proportion in sections DE 5 to DE 11.

The Commissioner will set the kilometre rates from time to time. When they do this, it becomes a type of law called secondary legislation.

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Next up: DF 1: Government grants to businesses

or “How government grants affect business tax deductions”
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Part D Deductions
Motor vehicle expenditure

DE 12Kilometre rate method

  1. This section applies for the purposes of calculating a deduction for the business use of a motor vehicle under section DE 2(1) if a person made an election under section DE 2B to apply this section.

  2. The amount of the deduction allowed for the business use of the vehicle in an income year is the sum of the amounts calculated under the following formula for each applicable kilometre rate for the vehicle for the income year:

    kilometre rate × kilometres travelled × business proportion.

    Where:

    • In the formula,—

    • kilometre rate is the applicable kilometre rate that is published by the Commissioner:
      1. kilometres travelled is the total number of kilometres the vehicle has travelled, for both business purposes and other purposes, to which the applicable kilometre rate applies:
        1. business proportion is the proportion of business use of the vehicle for the income year, calculated using a method described in sections DE 5 to DE 11, and expressed as a decimal.

          1. For the purposes of this section, the Commissioner must from time to time set kilometre rates.

          2. An instrument that sets kilometre rates under subsection (4) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).

          Notes
          • Section DE 12: replaced, on (applying for the 2017–18 and later income years), by section 77(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
          • Section DE 12(4): amended, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
          • Section DE 12(5) heading: inserted, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
          • Section DE 12(5): inserted, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).