Guy Gardiner Accounting Now accountingnow.co.nz

With the change in GST, it is a good time to re-examine how you claim your motor vehicle expenses.

Virtually every business owner has a private vehicle or has a wife/husband/partner who owns a private vehicle.

Claiming some business use of your privately-owned vehicle means keeping a logbook. The problem with logbooks is that they are a hassle to complete. But there is an alternative …

Transfer ownership of the private vehicle to the company and throw away your vehicle logbook.

The pros and cons of getting your company to own your vehicle are:

Advantage – You can throw away the logbook – companies don't need them.

Advantage – The company can claim GST on the value of the vehicle when ownership is transferred.

Advantage – The company can claim GST on all vehicle cash expenses … including all private travel.

Advantage – All vehicle expenses are 100 per cent tax deductible to the company … including all private travel.

Disadvantage – The company will have to pay fringe benefit tax (FBT).

Now, the interesting thing about FBT is that it is based on the value of the vehicle, not the amount of private use. So, if you sell your private Ferrari to the company, you will need a mortgage to pay the FBT… sell your private rust-bucket to the company and the FBT will be next to nothing.

So, if the private vehicle is modestly priced at around $10,000 and you are spending $50+ on private travel each week, then seriously consider selling it to the company… you will eliminate the need for a logbook and you will be better off financially because the income tax and GST you save will be more than the FBT you pay.