IRD Mileage Rate NZ 2026: Kilometre Rates and How to Claim

Current for the 2025-26 income year - rates published by IRD in June 2026

If you use your own vehicle for work - visiting clients, travelling between job sites, picking up supplies - you may be able to claim that as a tax deduction. The IRD kilometre rate method is the simplest way to do it. No receipts for every fuel stop. No tracking insurance and depreciation separately. Just your kilometres and the right rate.

Here is what the current rates are, how the two tiers work, and what records IRD expects you to keep.

Current IRD kilometre rates - 2025-26 income year

IRD sets new rates each year after the income year ends. The rates below apply for the 2025-26 year, from 1 April 2025 to 31 March 2026.

Source: IRD kilometre rates 2025-2026.

How Tier 1 and Tier 2 work

The 14,000 km threshold is based on your vehicle's total travel for the year - business and private combined - not just business kilometres.

Tier 1 covers the first 14,000 km of total vehicle travel. It includes both fixed costs, such as depreciation, insurance and registration, and running costs, such as fuel, tyres and servicing. This is the higher rate because it accounts for the full cost of owning and running the vehicle.

Tier 2 applies once total vehicle travel exceeds 14,000 km. It covers running costs only. The fixed costs are already accounted for in Tier 1, which is why the rate drops.

> Example: Ben is a sole trader electrician. His diesel van travels 22,000 km in the 2025-26 year - 16,000 km for work and 6,000 km privately. He claims the business portion at two rates:
>
> - First 14,000 km total travel at Tier 1
> - Remaining 8,000 km total travel at Tier 2
>
> His van is used 73% for business, because 16,000 divided by 22,000 is about 73%. His deduction is:
> (14,000 x $1.30 x 73%) + (8,000 x $0.38 x 73%) = $13,286 + $2,221 = $15,507 deductible

Who can use the kilometre rate method

The kilometre rate method is generally used by:

• Sole traders and self-employed people claiming vehicle expenses as a business deduction
• Close companies claiming vehicle expenses in some situations
• Employers reimbursing employees for using their own vehicle for work

It is not always available for vehicles owned by a company or trust where the vehicle is part of the business assets. Those situations may need the actual cost method, and FBT rules can also matter if the vehicle is available for private use.

Kilometre rate vs actual cost method

You have two main ways to claim vehicle expenses. Which one is better depends on your situation.

Most sole traders and contractors use the kilometre rate method because it is simpler. If you drive a lot for work and your actual costs are high, run the numbers both ways before choosing.

> Example: Sarah is a contractor working from home in Wellington, visiting clients across the region. She drives a petrol hybrid and covers 11,000 km total for the year - 8,500 km for business. All travel is under the 14,000 km Tier 1 threshold. Her deduction is 8,500 x $0.90 = $7,650.

What counts as business travel

Business travel can include:

• Travel between business locations, such as client sites, job sites and supplier visits
• Travel from your regular workplace to a temporary work location
• Travel required as part of carrying out your work

Travel that usually does not qualify:

• Travel from home to your regular workplace
• Personal errands added to a business trip
• Travel that is mainly private or personal

> Example: Tom works from a home office in Christchurch and drives to client sites throughout the day. His home-to-first-client and last-client-to-home trips may be claimable because his home is his regular place of business. If he had a separate office and drove from home to that office first, that commute would usually be private.

Records IRD expects you to keep

You need to keep tax records for seven years. For the kilometre rate method, keep:

• A logbook showing the date, destination, purpose and kilometres for each business trip
• Your vehicle's odometer reading at the start and end of the income year
• Evidence of total kilometres travelled

You do not need to keep fuel receipts or repair invoices if you use the kilometre rate method. That is the point of the method.

IRD accepts digital logbooks and apps. The logbook should be kept as you go, not rebuilt from memory at tax time.

Employee reimbursements

If you reimburse employees for using their own vehicle for work, the IRD kilometre rates are also a benchmark for tax-free reimbursement. Reimbursements at or below the relevant IRD kilometre rate are generally treated as tax-exempt if the travel is work-related and properly recorded.

> Example: A staff member drives their own petrol car 400 km on a work trip. You reimburse at $1.20/km = $480. If the travel is work-related and properly recorded, that reimbursement is generally tax-exempt. If you reimburse above the relevant rate, the excess may be taxable.

FAQs

Work out the tax impact

Use the TaxPop Self-Employed Tax Calculator to estimate how vehicle deductions affect your taxable profit and income tax.

General information only - check IRD kilometre rates before filing. Sources: IRD kilometre rates 2025-2026, IRD vehicle expenses, and IRD kilometre rates operational statement.