Motor Vehicle deductions – is travel from home to work deductible?
In nearly all cases, travel between home and work is considered private use. There are exceptions to the rule where travel from home to work is deductible.
- Where work is performed partially at home; and
- Travel by motor vehicle is in the course of performing work
If you make a company vehicle available for the use of employees, shareholder-employees or people associated with them for their private use, Fringe Benefit Tax (FBT) applies. If a private vehicle is used for work purposes, a log-book should be kept which details business related travel. Only business related travel is deductible.
There are some other criteria that are also considered in order to determine whether or not travel between home and work is truly business related.
- The vehicle used is required to transport goods and/or equipment necessary to perform the work;
- The taxpayer is involved in an “itinerant” occupation. In other words, the taxpayer doesn’t have a fixed place of work;
- The taxpayer can be expected to respond to emergency call-outs in the normal course of their employment; and
- The travel is work related between two workplaces, on of which is the taxpayer’s home
To be clear, for the purposes of both tax deductibility and FBT, where there is a business related journey that includes a private component, the private component would be ignored and the whole journey classified as business related where:
- The private benefit is incidental to the journey which is otherwise solely undertaken for business purposes; or
- The private travel is a brief deviation in the course of performing a business related activity
So that means that a trip to the shops to grab some lunch when travelling from one job to another will not reclassify the journey as private.
Many of these criteria would certainly apply to tradespeople. Those in service occupations where much or all of the work is performed solely from an office would be much less likely to qualify.
The IRD have a full interpretation statement on their website if you want to read more detail about their policy. You can access that by clicking here.
If you want advice specific to your own situation, please get in touch.