Hi Lisa

> I am about to purchase a new vehicle and would like to know if
> anyone has any advice on the best way to structure vehicle
> ownership.

> Like a lot of small business, my vehicle is used mostly (80%)
> for business, but it is available for private use (20%).

> Until now, I have owned a vehicle myself and claimed some
> vehicle expenses throught the company. I would like the
> company to own the vehicle, but do not want to file & pay FBT.

Unfortunately you've hit one of the worst subjects in business. There is no nice answer - well, not nice AND legal. Also even your current position may have problems. For example, is your insurance adequate for when you use it for the company?

You've used the term company. Some people use this a bit loosely, so the first thing is I am assuming you actually use a company structure. And this also brings other issues, like having done company accounts and using an accountant - who could probably tell you all the options. Certainly it might pay to get their preferences first - but watch out if they have complex procedures - these might not save you much for the extra hassle and paperwork.

This gets a bit hairy because there are many options - but none nice - and many people find the whole thing just too confusing.

So you options are you own the vehicle - or the company does.

If the latter is chosen, you either pay FBT (this can probably be done with your tax return instead of quarterly) - or put in a quarterly journal for reimbursement of vehicle expenses. (It has to be taken into account for GST returns.)

Personally this always used to be my first choice - but the introduction of variable rates means that when income is low, paying FBT pay be preferable. Either way, FBT makes all car costs a company expense - including depreciation, insurance, etc.

Oh - and you can reduce FBT if the car is away overnight (e.g. a work trip, in the garage being fixed, etc.) You also want to watch insurance - a private policy won't do.

If you claim running a privately-owned vehicle, then the options multiply - as does the record keeping. You keep a log book for three months every three years (from memory) or when business changes. (For example generally you can't claim to / from work running - but there are exceptions.) There are all sorts of reasons business changes may change the percentage applicable.

I'm assuming you are above the 5,000 km threshhold and so cannot claim allowances. So all your expenses have to be apportioned - and at year-end you can apportion depreciation.

The GST issues are dealt with according to GST rules - not tax rules - so may be slightly different. Fortunately though they're quite common - so IRD does have policies on this. There's lot's of rules - the trick comes mainly with buying and selling - but the whole GST aspect could have quite a lot said about it.

I hope this helps raise your awareness of some of the issues. I personally prefer to keep everything simple - and covered by FBT. Anything else is fraught with danger. However, if you have a high value vehicle FBT may be too much - so that's also a factor to consider.

Best wishes

Phil Astley
www.businessacademy.co.nz

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john

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