Car & Vehicle Expenses — New Zealand Tax Rules

Claim business vehicle costs using IRD's kilometre rate method (Tier 1 and Tier 2) or the actual cost method.

Claimable: Partially claimable · Tax authority: Inland Revenue

Inland Revenue Rules

• IRD's kilometre rate method for 2024/25 (petrol/diesel): Tier 1 — NZ$1.04/km for the first 14,000 km; Tier 2 — NZ$0.38/km for km above 14,000.
• Separate rates apply to electric vehicles (Tier 1: 12c/km; Tier 2: 9c/km for the electricity component, plus Tier 2 general rate for other costs) and hybrids.
• Alternatively, use the actual cost method: claim the business proportion of all running costs — fuel, insurance, registration, WoF, maintenance, and depreciation.
• If you use the actual cost method, you need a logbook recording at least 90 days of trips to establish the business-use percentage.
• Travel between your home and a fixed regular workplace is NOT deductible — it is personal commuting.
• If your home is your principal place of business (genuine home office accepted by IRD), journeys from home to client sites are business travel and claimable.

Limits

Tier 1: NZ$1.04/km for first 14,000 km per year. Tier 2: NZ$0.38/km above 14,000 km (petrol/diesel — other vehicle types vary). Actual cost: no cap, but must be evidenced and proportionate.

Worked Example

Wiremu drives 11,000 business km in 2024/25 in a petrol car. Tier 1 rate: 11,000 × NZ$1.04/km = NZ$11,440. Using the actual cost method: total car costs NZ$14,000 per year, logbook shows 65% business use — claim NZ$14,000 × 65% = NZ$9,100. He uses the km rate as it gives a larger deduction.

Record Keeping

• Keep a logbook of all business journeys: date, start and end location, purpose, kilometres
• Record odometer readings at the start and end of each tax year
• Keep all fuel, insurance, registration (rego), WoF, repair, and servicing receipts (actual cost method)
• Separate business travel from personal and commuting travel clearly
• For actual cost method: complete a 90-day logbook to establish the business-use percentage

Frequently Asked Questions

Which is better — the IRD km rate or actual costs?

The km rate is simpler, requires minimal records, and is often generous for moderate mileage. For high-mileage drivers with an economical vehicle, actual costs may be higher. Calculate both at year end and choose the most beneficial — but once you choose a method for a vehicle in a given year, you should apply it consistently for that year.

Can I claim my daily commute as business mileage?

No. Travel between home and a fixed workplace is personal commuting and not deductible. However, if your home is your genuine principal place of business, all travel to client sites and other work locations is claimable as business travel.

Are there different km rates for electric vehicles?

Yes. IRD publishes separate rates for electric vehicles, petrol, diesel, and hybrid. For 2024, the EV Tier 1 rate covers only the electricity cost (12c/km); you also apply a general Tier 2 rate to cover depreciation and other running costs. Check IRD's current published rates each year.

Do I need a logbook for the km rate method?

No full logbook is required for the km rate method, but you must record every business journey — date, start and end point, purpose, and kilometres. A simple mileage diary or app is sufficient. The logbook is only mandatory for the actual cost method (minimum 90 days) to establish your business-use percentage.

How do I claim vehicle expenses in myIR when filing my IR3?

In myIR, enter your total vehicle deduction in the 'Expenses' section of your IR3. For the km rate method, the figure is simply your total business kilometres × the applicable Tier 1 or Tier 2 rate. For the actual cost method, it is total vehicle running costs × logbook business-use percentage. Keep your mileage diary or logbook as supporting records.