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Changes to Motor Vehicles - The new Kilometre Rate

If you're a sole trader or in a partnership (and use your own vehicle for business), you can claim your running costs as an income tax deduction. Traditionally, if you own a company you're liable for FBT any time you provide non-cash benefits (like motor vehicles) to your staff. Recent amendments to the income tax legislation, however, now allow close companies to use the kilometre rate (where one or two motor vehicles are provided to shareholder employees for their own use) to calculate deductions for motor vehicles instead of paying FBT.

You can now claim a deduction based on a kilometre rate method. This method uses set rates, which are divided into two tiers:

·     First tier - recovery of both the vehicle's fixed costs and it's per kilometre running costs, for the first 14,000 kms.

·     Second tier - recovery of the vehicle's per kilometre running costs only, after 14,000 kms. 

The following rates per kilometre will apply for the 2017/2018 income year: 

Vehicle type

First 14,000 kms

After 14,000 kms

Petrol or diesel

76 cents

26 cents

Petrol hybrid

76 cents

18 cents

Electric

76 cents

9 cents

As an a side, note where employees are reimbursed for work travel using their own vehicle, a transitional rate of 76c / km is available for the 2018/2019 income year to calculate their tax-free reimbursement amount.

This was last updated 7 December 2018.

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