Car Expenses - Able to Expense at 100% all business related travel costs?

[treewx]

Chatting with my Accountant. They have been expensing 30% of my motor vehicle expenses.
e.g for one entry, I paid $50 for gas, 30% was expensed to my company.

The thing is, I pretty much only ever use my car for looking after my properties, or looking a new prospective properties. It seems like I am getting shafted. I also keep an exact car log. I also have GPS on my phone, and using a google service can tell exactly where I have been for the previous year -"Look there I am at my investment property working, proof!"

Surely, given that I have an exact log showing that business related trips I can expense all of those at 100%? Thinking my accountant has it wrong.

Had a look no the IRD site here: /business-income-tax/expenses/vehicle-exp/

From above it seems that I should be able to expense 100% of my business related travel costs? Just wanting to put it out to the group to make sure that I have this correct? Perhaps someone more familiar can give an answer.

Thanks

[spaceman]

^ I reckon you're getting shafted too .

I think you're accountant plucked 30% as a nice safe number that's unlikely to get audited.

Of course you can claim 100% of your business related travel costs.....why would you think otherwise???....of course a mixed use car does throw in a few wrinkles...but nothing insurmountable


Cheers
Spaceman

[treewx]

Awesome thanks. Seems so stupid. Guess I assumed paying a professional meant they would be right. Incorrect.

Thanks

[BigDreamer]

or looking a new prospective properties

Are we allowed to claim motor expenses for looking at prospective properties? I thought it was only related to current properties.

[Rosco]

Hi treewx,

Presume we are talking about long term hold rental properties. Also presume you are using a sole trader, partnership, LTC or Trust.

You could
- claim the IRD or AA mileage rates for the actual mileage you have done. You might want to work out this total, as it could me higher then the second option
- or, do a log book for 3 months to establish your business use for the next 3 years. Then claim this % of all your vehicle costs including depreciation if the rental entity owns your vehicle

100% seems very high, and even if correct I would look at claiming say 95% to give you some leeway. Ie you must use if personally sometime, and what happens if IRD catch you at the local beach (very unlikely they would bother investigating you that hard!).

Business use, is relating to your rental business. So to rental properties, to the dump, to see professionals, to pick up items for the rentals, to rental seminars, and anything else relating to your business as a long term rental property owner.
Using the vehicle to look at new properties is a cost of buying that new property, and not deductible for your existing long term hold rental business.

Ross

[Rosco]

Also, on Property talk now, over the last month you have put up two threads that show your accountant doesn't sound up with the play. Why are you with them?

Ross

[spaceman]

.....


100% seems very high, and even if correct I would look at claiming say 95% to give you some leeway. Ie you must use if personally sometime, and what happens if IRD catch you at the local beach (very unlikely they would bother investigating you that hard!).

He said 100% of his business trips ....not 100% of the costs ......which is why I said of course he could....and then noted a mixed use car can throw in a few wrinkles.

.........Using the vehicle to look at new properties is a cost of buying that new property, and not deductible for your existing long term hold rental business.

Ross

This is incorrect ...kinda. Ross is correct ONLY if you've yet to purchase your first rental. Once you've purchased your first rental you're "in the business" and prospecting costs are deductible.

Cheers
Spaceman....http://www.propertytalk.com/forum/sh...ght=#post41698

[Anthonyacat]

Actually Spaceman, Ross is correct regardless, as backed up by that (very informative) old thread. No matter what, those costs should be capitalised to the cost of the property if you buy it. Unsuccessful prospecting costs would be deductible.

But in practice, yes, the motor vehicle costs are so immaterial I'd certainly claim them anyway.

[spaceman]

^ O RLY???

How do you explain away IS 2783 .... produced by the IRD .....or has it been since overruled???

My argument is ....feasibility studies are deductible up until the point where you decide to go ahead with the purchase. Thus all toing & froing prior to signing on the dotted line can be claimed rather than having to be capitalised.

Cheers
Spaceman

[Anthonyacat]

That is an interesting point, and beyond my personal expertise. Always nice to consider this sort of situation.

As far as I know it hasn't been overruled, but it's intenton is clearly for business ventures rather than property. Could probably be made to relate.

I am certain the IRD would argue against your definition of when purchase intention appears. Won't be when you sign the S&P, but when you make the offer; that's the first proof of when you've decide you want it, isn't it?

One other thing I can think of is that it can be difficult to determine when an investment activity ends and a business activity begins. Used to be an opposite concern when investment losses could be deducted from your income for family assistance purposes but not business losses.

[Davo36]

If you own a car in a company, you have to pay FBT don't you?

Or do some sort of claim adjustment on the expenses you claim?

[Rosco]

Depends!

- Work related vehicle can be 100% and no FBT. Such as a true ute, truck etc
- If it is an LTC - then can't use FBT if shareholder. So need log book for 3 months to establish business use.
- If normal company, then FBT applies

Ross