Installing towbar on car - a deductible expense?

[lidistick]

Hi guys,

I would like to put on a towbar to the car to cart rubbish away from the IP. The cost is about $500. Is this a deductible cost?

Cheers.

[Cassandra]

I have claimed it....but then again i have a 3 month log showing 80% business use of my vechile

[lidistick]

Ok, so if I don't have a log book, I should be able to claim 25% of it?

But thanks for the reply.

[Perry]

I would like to put on a towbar to the car to cart rubbish away from the IP. The cost is about $500. Is this a deductible cost?

100% deductible if it's a business vehicle.
Pro rata, if not. Be aware of the GST
implications, though.

[drelly]

What Perry said. Where did you get 25% from? You need a log book if the vehicle is in your own name.

[lidistick]

What Perry said. Where did you get 25% from? You need a log book if the vehicle is in your own name.

From here.

• You can use the result of your three months' recording to claim the business share of your vehicle expenses over the next three years, provided your business use of the vehicle does not change by more than 20%.

• You should still keep records of the total vehicle running costs and record the total distance travelled for the income tax year.

• If you do not keep a vehicle logbook you may claim up to 25% of the vehicle running costs as a business expense. However, you could be asked to substantiate the percentage claimed.

• Alternatively, you may use Inland Revenue mileage rates to make a claim on your vehicle.

Cheers.

[drelly]

Ahrm yeah.... but... you're kinda missing the point. You can claim 99.9% if you want but you could be asked to substantiate the percentage claimed. That's the important bit, not the "25%".

[Keys]

100% deductible if it's a business vehicle.
Pro rata, if not. Be aware of the GST
implications, though.

Please elabourate.

[lidistick]

I totally agree with you its subjective and IRD could ask me etc.
According to my accountant (when spoken to previously- and not specifically about this issue), its unlikely given the small and miniscule amounts I'm claiming in vehicle expenses

[Perry]

Please elaborate.

If the rubbish removed is from residential IP's
only, is there not a risk that claiming the GST
may be disallowed by IRD - presuming the
claimant to be GST registered, of course.
(i.e. for other business activities)

[drelly]

Lidistick,
I agree, you are unlikely to be audited based upon your vehicles expenses but they are likely to ask for proof if they audit you, whatever the reason.

Perry,
If he's a residential investor, then he won't be registered for GST and would just deduct the whole expense.

[lidistick]

Thanks for that.
I'm not registered for GST.

Car has been used for other business. Estimated business use last year was 80%. This business entity has since been dissolved.

Many thanks for the input

[Perry]

Perry,
If he's a residential investor, then he won't be registered for GST and would just deduct the whole expense.

I was suggesting caution if the poster was registered for GST
and made use of the same vehicle for GST assessable earning
activities. In reality, it may be that De Minimus Non Curat Lex
would apply. And I suspect that most accountants would take
that stance, too. But one can never 'trust' the IRD.

But yes, if not registered for GST, it's straightforward. Or
should be.

[Student Rent]

Deductibility of expenses

Essentially, from a tax or accounting point of view, the Income Tax Act (section DA 1: General permissions) allow the deduction of expenses if they meet the criteria of having a nexus to the derivation of income or income generating activities. In this case the income derivating activity is the removal of waste to maintain your property. HOWEVER. Be very careful, as the installation of a towbar is dodgy area. You may be able to justify or you may not- depends on how much you actually use it for business use. If you use it 50-50 with personal use, I would claim 50% of it.

Please let me know if this helps or if you have any other questions.

Cheers

[lidistick]

No it will be use solely for small trips to the dump for garden waste from the IP. No boats or other bits to tow. Our property has hardly any garden and our gardener sees to that anyway