The Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 introduced key updates to how these expenses are calculated and applied to shareholder-employees.
How Vehicle Use is Treated
- A close company is defined as a company with five or fewer natural persons who hold more than 50% of the voting rights.
- When a shareholder-employee uses a private vehicle for company business, it is treated as business use by the company itself.
- This makes it easier for close companies to claim business-related vehicle expenses while ensuring tax compliance.
Choosing the Right Method
Close companies can elect between two methods for apportioning vehicle expenses:
- Kilometre Rate Method – Uses IRD-approved mileage rates to calculate business-related vehicle expenses.
- Cost Method – Requires detailed tracking of actual vehicle expenses and the proportion used for business purposes.
This choice was officially inserted into the Income Tax Act 2007 by the 2017 tax amendments.
Links
- Election to use kilometre rate method or costs method
- Application of subpart to close companies
- Income Tax Act 2007 – Close Company Definition
- Income Tax Act 2007 – Business Use of a Motor Vehicle by a Shareholder-Employee