Motor Vehicles quite often are used for both business and private travel, so the IRD have rules for sole traders, employers and companies outlining what adjustments or how much Fringe Benefit tax applies for this private use.
Driving from home to, and back from, work is considered private use unless taking a “work related vehicle” meets the conditions for that travel deemed to be a business requirement.
A ”work related vehicle” needs to be noticeably and permanently sign written and not designed to carry passengers.(Hence the popularity of UTEs). There must be a business reason for taking the vehicle home such as being on call or that you will drive to various sites directly from home. The employer or company must instruct the employee in writing that the vehicle is not to be driven for private use and then monitor that use. Some private use could be provided in the instruction by restricting the private use allowed to the weekends and therefore reducing the value of the benefit calculated by 5/7ths.
For sole traders the requirement is the most straight forward you claim the business use percentage, by keeping a log book for a 3 month period which will provide the percentage for business use. That is the % you claim of the GST on the purchase price and running costs and eventually the % of GST you declare on the sale of the vehicle. This % also applies to claiming the vehicle running expenses and depreciation to work out your taxable profit. Alternative you could keep a log of business kms travel and claim travel at the public mileage rates.
For a closely held company you now have the option of the method used by sole traders or the fringe benefit adjustment or fringe benefit tax.
Sole Traders who employ people and provide a vehicle to the employee could also be up for Fringe benefit tax.
