New Zealand
Reimbursement for using a private vehicle for business purposes
The latest New Zealand IRD kilometre rates are for the 2025–26 income year: Tier 1 is NZ$1.20/km for petrol, NZ$1.30 for diesel, NZ$0.90 for petrol hybrid and NZ$1.22 for electric vehicles. A lower Tier 2 rate applies after the relevant distance threshold. Employers can also use these rates to estimate employee vehicle costs, subject to the reimbursement rules below.
IRD kilometre rates by income year
The 2025–26 rates cover business expense claims for the standard income year ending 31 March 2026. IRD published them in June 2026, after that year ended. All rates below are in New Zealand dollars per kilometre.
| Vehicle type, 2025–26 | Tier 1 | Tier 2 |
|---|---|---|
| Petrol | $1.20 | $0.37 |
| Diesel | $1.30 | $0.38 |
| Petrol hybrid | $0.90 | $0.24 |
| Electric | $1.22 | $0.23 |
For employee reimbursements in the current 2026–27 income year, IRD’s July 2026 guidance allows continued use of these rates or another method that reasonably estimates the employee’s costs. These are not newly published 2026–27 business deduction rates. Confirm the method and payment rate with your employer.
How the 14,000 km threshold works
Tier 1 includes fixed ownership costs and running costs. It applies to the business portion of the first 14,000 total kilometres travelled by the vehicle in the income year. Private kilometres count towards that threshold, even though they do not themselves qualify for a business claim.
Tier 2 covers running costs only. It applies to the business portion of travel above 14,000 total kilometres. The threshold does not reset each month or for each reimbursement claim.
For example, a petrol vehicle travels 20,000 km in 2025–26, with a supported 40% business-use proportion. Using the kilometre method, its business expense calculation is:
- Tier 1: 14,000 × 40% × $1.20 = $6,720;
- Tier 2: 6,000 × 40% × $0.37 = $888;
- total business vehicle expense: $7,608.
This is a deductible expense calculation, not the amount of tax saved or a guaranteed payment from an employer.
Employee mileage reimbursement and the 3,500 km rule
An employer and employee agree the reimbursement arrangement. IRD’s rates are an accepted way to estimate the tax-exempt portion of a payment, rather than a compulsory rate every employer must pay. Actual costs or another reasonable estimate may also be used. A payment above the eligible reimbursement amount can have a taxable excess.
When using the kilometre-rate method, keep a logbook or other evidence of employment use and monitor total annual vehicle kilometres. If those records are not available, Tier 1 is limited to the first 3,500 employment kilometres, with Tier 2 used after that. Your employer still needs a record of the employment kilometres being reimbursed, even when this 3,500 km limit applies.
For example, a 100 km petrol-car work trip reimbursed at the current Tier 1 rate is 100 × $1.20 = $120, provided the applicable threshold has not been reached. Once Tier 2 applies, the same distance gives 100 × $0.37 = $37.
These vehicle rates cover cars, vans and utility vehicles. They do not cover motorcycles or scooters. Ordinary home-to-work travel is generally personal travel and should be kept separate from business trips.
Keep a vehicle logbook
Record each business journey’s date, distance and reason, and identify the vehicle. Keep odometer readings so you can distinguish business kilometres from total kilometres and track the annual threshold. Retain receipts for any actual costs being claimed.
A representative logbook period of at least 90 consecutive days can establish a business-use percentage. Record the start and end dates and odometer readings, plus the business journeys during that period. The percentage can generally be used for up to three years if business use remains within IRD’s permitted variation; a change of more than 20% requires a new assessment.
For a self-employed person or business, the kilometre method is an alternative to claiming the business share of actual vehicle costs. Kilometre rates already include depreciation, so it is not claimed again separately under that method. Employee reimbursement and a business’s own expense deduction are different calculations.
Previous IRD kilometre rates
Use the relevant income year for a business expense deduction. Historical rates are shown here for earlier claims.
| Income year | Vehicle type | Tier 1 | Tier 2 |
|---|---|---|---|
| 2024–25 | Petrol | $1.17 | $0.37 |
| 2024–25 | Diesel | $1.26 | $0.35 |
| 2024–25 | Petrol hybrid | $0.86 | $0.21 |
| 2024–25 | Electric | $1.08 | $0.19 |
| 2023–24 | Petrol or diesel | $1.04 | $0.35 |
| 2023–24 | Petrol hybrid | $1.04 | $0.21 |
| 2023–24 | Electric | $1.04 | $0.12 |
| 2022–23 | Petrol or diesel | $0.95 | $0.34 |
| 2022–23 | Petrol hybrid | $0.95 | $0.20 |
| 2022–23 | Electric | $0.95 | $0.11 |
Track business kilometres with Motolog
Motolog helps you record trips automatically, separate business and personal driving, and prepare mileage reports. Official rates are available where supported, and custom rates are also available. Check the vehicle type, income year, distance threshold and reimbursement arrangement before submitting a report.
Explore automatic mileage tracking with Motolog, or compare plans on our pricing page.