Understand New Zealand's vehicle expense rules, calculate business mileage using Inland Revenue kilometre rates, compare the kilometre-rate and actual-cost methods, understand the 14,000 km threshold, employee reimbursements, logbooks, GST and business versus private travel.
Inland Revenue publishes vehicle kilometre rates that vary according to the vehicle type. The rates also have two tiers. Tier 1 combines fixed and running costs, while Tier 2 covers running costs only.
The critical detail is that the 14,000 km threshold relates to the vehicle's total travel — business and private — during the income year. Only the business portion is deductible.
Petrol, diesel, petrol hybrid and electric vehicles have different published rates.
Your total annual vehicle travel determines whether Tier 1 or Tier 2 applies.
Only the business portion of the vehicle use is used for the business deduction.
These are the rates published by Inland Revenue for the 2025–26 income year.
| Vehicle type | Tier 1 | Tier 2 | When used |
|---|---|---|---|
| Petrol | $1.20 / km | $0.37 / km | First 14,000 total km / over 14,000 |
| Diesel | $1.30 / km | $0.38 / km | First 14,000 total km / over 14,000 |
| Petrol hybrid | $0.90 / km | $0.24 / km | First 14,000 total km / over 14,000 |
| Electric | $1.22 / km | $0.23 / km | First 14,000 total km / over 14,000 |
Select your vehicle type, enter total kilometres travelled during the income year and enter the business kilometres. The calculator applies the latest published 2025–26 IRD rates.
The rate is not simply “business kilometres × one fixed rate”. You first determine total vehicle travel, then determine how much of the business travel falls before or after the 14,000 km threshold.
Business kilometres × Tier 1 rate
Business portion within first 14,000 km × Tier 1 + business portion above 14,000 km × Tier 2
Tier 2 is designed to represent running costs after the vehicle has travelled more than 14,000 km in total.
New Zealand's rules generally require you to identify the business portion of vehicle use. If the vehicle is used for both business and private travel, you need to allocate the costs appropriately.
If you use a vehicle to earn business income, New Zealand provides several ways to determine the deductible business portion of vehicle costs.
Use the published IRD rate applicable to the vehicle and income year to calculate the business portion.
Track actual vehicle costs and claim the appropriate business portion.
If no logbook is maintained, specific rules can limit the business claim to 25% of vehicle running costs, subject to the applicable requirements and substantiation.
Inland Revenue allows a logbook to be used to determine the business proportion of vehicle use.
Record the start date and the vehicle odometer reading.
Record the date, distance and reason for each business journey.
Record the ending date and odometer reading after at least 90 consecutive days.
Divide business kilometres by total kilometres during the logbook period.
Business kilometres ÷ total kilometres × 100
Total distance during the logbook period:
2,500 km
Business distance:
1,800 km
The business-use percentage is 72%.
Eligible vehicle costs can then be allocated according to the applicable business-use percentage.
Instead of relying on kilometre rates, a business can track actual vehicle expenses and allocate the business portion.
Keep records of fuel expenditure attributable to the vehicle.
Repairs, servicing and other qualifying maintenance costs.
Allocate the relevant business portion.
Relevant vehicle running costs can form part of the actual-cost calculation.
Business-related parking can have separate deductible treatment where the requirements are met.
The business portion of depreciation may be relevant under the applicable actual-cost rules.
GST is an important distinction for New Zealand businesses.
Inland Revenue states that self-employed people using kilometre rates do not need to consider GST in the kilometre-rate calculation, and no separate GST credit is claimed on vehicle expenses calculated using the kilometre rates.
GST treatment can differ when actual vehicle expenses are being claimed. GST-registered businesses should apply the applicable GST rules to their actual expenses.
The IRD kilometre rates are also relevant to employer reimbursements, but they should not be confused with a universal mandatory mileage payment.
An employee may use their own vehicle for the employer's business purposes.
IRD kilometre rates can be used as a reasonable estimate in appropriate circumstances.
IRD notes that published rates relate to the relevant income year and may not always reflect current costs when employers reimburse employees in a later period.
| Question | Business deduction | Employee reimbursement |
|---|---|---|
| Who is calculating? | Business / self-employed taxpayer | Employer / employee arrangement |
| Purpose | Calculate deductible business vehicle expenditure | Reimburse employee business vehicle use |
| Are IRD rates relevant? | Yes | They may be used as a reasonable estimate |
| Mandatory universal payment? | No | No |
| Records matter? | Yes | Yes |
If you drive to clients, meetings, deliveries or different work locations throughout the year, reconstructing every trip months later can become difficult.
The purpose of mileage tracking is not to create deductible kilometres. It is to accurately document journeys that genuinely happened and determine which portion was business-related.
Regular client and business journeys are easy to forget when records are reconstructed later.
Actual journey records can provide a better basis than trying to remember an entire year's driving.
Keeping mileage information throughout the year makes year-end calculations much easier.
Total annual travel: 10,000 km
Business travel: 4,000 km
4,000 × $1.20 = $4,800
Because total vehicle travel remains below 14,000 km, the business kilometres fall within Tier 1.
Total annual travel: 20,000 km
Business travel: 12,000 km
12,000 × $1.20 = $14,400
Although total vehicle travel exceeds 14,000 km, the 12,000 business kilometres remain within the first 14,000 km band.
Total annual travel: 25,000 km
Business travel: 18,000 km
14,000 × $1.20 + 4,000 × $0.37
= $18,280
Here, part of the business travel falls above the 14,000 km threshold and therefore uses Tier 2.
Total annual travel: 16,000 km
Business travel: 5,000 km
5,000 × $1.22 = $6,100
The vehicle exceeds 14,000 total kilometres, but the 5,000 business kilometres are still within the Tier 1 band.
| Feature | Kilometre rate | Logbook | Actual costs |
|---|---|---|---|
| Complexity | Lower | Medium | Higher |
| Business-use evidence | Required | Detailed | Detailed |
| 90-day logbook | Not necessarily | Yes | Useful |
| Actual expenses | Represented by rates | Allocated by business use | Tracked directly |
| GST consideration | Different treatment | Depends on method | GST rules may apply |
| Best for | Simpler record keeping | Establishing business-use percentage | Detailed expense tracking |
$1.20 / $0.37
Tier 1 / Tier 2 for 2025–26.
$1.30 / $0.38
Tier 1 / Tier 2 for 2025–26.
$0.90 / $0.24
Tier 1 / Tier 2 for 2025–26.
$1.22 / $0.23
Tier 1 / Tier 2 for 2025–26.
Inland Revenue states that if a vehicle is only used for business purposes, the full running costs can generally be claimed as a business expense, subject to the applicable rules and records.
Where a business vehicle is used for both business and private purposes and no logbook is kept, Inland Revenue states that the business claim can be limited to 25% of vehicle running costs, subject to the applicable rules.
If your real business use is substantially higher than 25%, relying on a default percentage can potentially leave legitimate business-use costs unsupported or unclaimed.
A proper logbook or reliable mileage-recording system can make it much easier to establish the actual business-use percentage.
When the journey occurred.
How far the journey was.
Why the journey was business-related.
Start and end readings where required.
Fuel, maintenance, insurance and other actual costs where relevant.
Maintain a clear basis for allocating vehicle use.
The tax calculation is only as good as the mileage records behind it. FirstMileage helps you record actual journeys using GPS so your mileage history is built throughout the year.
FirstMileage cannot decide whether a journey is deductible. What it can do is help you build a reliable record of the journeys that actually happened, so you are not trying to reconstruct your mileage from memory months later.
Start tracking your mileageAlways verify the current IRD rules and rates before filing a tax return or calculating an employee reimbursement.
General information only: This page is an educational guide and is not tax, legal or financial advice. New Zealand tax rules and published rates can change. Check the current Inland Revenue guidance or speak with a qualified New Zealand tax professional before relying on the information for a tax return.
Record your actual journeys throughout the year, keep an organised mileage history and make your year-end vehicle calculations easier.
Start tracking with FirstMileage