NZ Mileage Rates 2026: Vehicle Expenses for the Self-Employed

Short answer: New Zealand has no “mileage rate” as such — Inland Revenue publishes kilometre rates. For the 2026 tax year (1 April 2025 – 31 March 2026), Inland Revenue’s kilometre rates are $1.20 per km for petrol, $1.30 for diesel, 90c for petrol hybrid and $1.22 for electric, for the first 14,000 km a vehicle travels. Beyond 14,000 km the tier two rates are 37c, 38c, 24c and 23c. You claim only the business share of those kilometres, and travel between home and work does not count.

Vehicle expenses are one of the deductions Inland Revenue writes its own specific rules for, and those rules trip up more sole traders than almost anything else in the return. Below: the current rates, the three methods, where the line falls between business travel and commuting, and the log IRD expects. For the wider picture, start with how tax works when you are self-employed in New Zealand and what the IR3 asks for.

What are the IRD kilometre rates for the 2026 tax year?

A note on naming first, because it causes real errors: IRD names a tax year by the date it ends. The 2026 tax year runs from 1 April 2025 to 31 March 2026. Rates published as “2025-26” and “2026” are the same rates.

Vehicle type	Tier one (first 14,000 km)	Tier two (beyond 14,000 km)
Petrol	$1.20 per km	37c per km
Diesel	$1.30 per km	38c per km
Petrol hybrid	90c per km	24c per km
Electric	$1.22 per km	23c per km

Source: Inland Revenue, Kilometre rates 2025-2026, and Operational Statement OS 19/04 (KM 2026), issued 3 June 2026.

Tier one rose for every fuel type this year. The comparison against the prior year is worth knowing if you are amending an earlier return or filing late.

Vehicle type	Tier one 2025 year	Tier one 2026 year	Tier two 2025 year	Tier two 2026 year
Petrol	$1.17	$1.20	37c	37c
Diesel	$1.26	$1.30	35c	38c
Petrol hybrid	86c	90c	21c	24c
Electric	$1.08	$1.22	19c	23c

The electric tier one rate moved the most, up 14 cents. Rates only apply to the year they were set for — you cannot use the 2026 figures on a 2025 return.

What is the difference between tier one and tier two?

Tier one covers your vehicle’s fixed costs and its running costs — relicensing, insurance, interest on what you borrowed to buy it, depreciation, plus fuel, servicing and tyres. Tier two covers running costs only, because after a certain amount of travel the fixed costs have already been recovered.

The switch happens at 14,000 kilometres, and this is where most people get it wrong. Quoting the operational statement directly, the tier one rate applies to the first 14,000 kilometres travelled by a vehicle in the income year including business and non-business use. The threshold measures the odometer, not your work.

A worked example. Your ute is diesel. Over the year it travelled 20,000 km in total, of which 8,000 km were business.

• The first 14,000 km of total travel sit in tier one. Your business share of that band is 8,000 ÷ 20,000 = 40%, so 5,600 business km at $1.30 = $7,280.
• The remaining 6,000 km of total travel sit in tier two. Your business share is 2,400 km at 38c = $912.
• Total claim: $8,192.

Anyone who claims all 8,000 business kilometres at tier one because they drove under 14,000 km “for work” is overstating the deduction. The old 5,000 km cap on this method, which still appears in a lot of stale content online, went when the current kilometre rate method replaced the old mileage rate from the 2017-18 income year. Inland Revenue’s OS 18/01 states plainly that the 5,000 kilometre limit set out in OS 09/01 no longer applies.

What are my three options for claiming vehicle expenses?

Method	How it works	What it suits
Kilometre rates	Business kilometres × the published tier one and tier two rates	Moderate business use, no appetite for keeping fuel and repair receipts
Logbook + actual costs	A 90-day logbook sets your business-use percentage, applied to your real vehicle costs	An expensive vehicle, or heavy business use, where actual costs exceed the flat rates
Actual costs, no logbook	Add up real costs and apportion, but without records the claim is limited	Rarely the best outcome, and the fallback below applies

Petrol, diesel, hybrid and electric vehicles can use any of these. Inland Revenue sets kilometre rates only for those four categories, so a vehicle outside them has to use the actual cost method.

The third row is really a penalty for poor records: if you keep no logbook, IRD limits the claim to 25% of your vehicle’s running costs, and you may still be asked to substantiate even that. It is almost always worse than a properly evidenced claim.

Can I switch methods from one year to the next?

No. You must keep using one method for as long as you own the vehicle. Choose deliberately in the first year you claim, because you are committing for the life of that vehicle in the business. A different vehicle gives you a fresh choice.

One consequence catches people out: the kilometre rates already include depreciation. Use them and you cannot also claim a separate depreciation deduction on that vehicle. If the vehicle is a significant asset and you want to depreciate it, the logbook and actual-cost route is the one that lets you.

What counts as business travel, and can I claim the drive to work?

The general rule in New Zealand is blunt: travelling from home to work is a personal trip, not a business one. The courts have treated the distance between your home and your base of operations as a private choice you made, so the cost is not incurred solely in earning income. A handful of narrow exceptions exist, largely where the home genuinely is the base of operations or the travel is inherent in the work itself, but they are exceptions and IRD reads them narrowly.

Travel that generally does count: driving from your home office or workshop to a client, a job site or a supplier; travel between two work locations in the same day; trips to the bank, the accountant or the wholesaler for the business; and the extra kilometres of a work detour on an otherwise private journey — record the detour, not the whole trip.

Travel that generally does not: home to a fixed workplace and back, however early or late; personal errands and the school run; and the private portion of any mixed trip.

If you are a contractor working on one client’s site for months, be careful. That site can start to look like a base of operations, which makes the daily drive commuting. Inland Revenue’s vehicle expenses guidance is where to check your own facts.

What does IRD expect my vehicle log to contain?

For each business journey, record the date, the distance and the reason for the trip. Odometer readings sit alongside that rather than on each trip: the reading at the start and at the end of the logbook test period, and — if you use the kilometre rates — a reading at every balance date, so you can tell when the vehicle crossed 14,000 km. “Client visit” is thin; “site visit, 14 Mercer St, Wilson job” is what stands up.

If you are using the logbook method to set a business-use percentage, the rules are specific:

Requirement	Rule
Minimum logbook period	At least 90 consecutive days
How long the result lasts	Up to 3 years
When it expires early	If business use changes by more than 20%
After 3 years	Keep a fresh 90-day logbook

The kilometre rate method does not require a 90-day logbook in the same formal sense, but you still need a record of every business trip and your odometer readings — otherwise there is nothing to multiply the rate by. IRD publishes a free vehicle logbook spreadsheet if you want a template.

Keep all of it for at least 7 tax years, the standard New Zealand retention period, and note that if you store records offshore, cloud storage included, either you or your provider needs IRD approval — see Inland Revenue’s record keeping guidance. The same applies to your fuel and repair receipts — see what receipts a self-employed person in NZ needs to keep.

When do I claim, and what if the rates are not published yet?

Vehicle expenses reduce your net profit, which you declare in your IR3 individual income tax return for the year ended 31 March. Without a tax agent, the 2026-year IR3 was due 7 July 2026. Inland Revenue can grant a tax agent’s clients an extension of time that runs to 31 March of the following year — 31 March 2027 for the 2026 return — and it cannot legally extend past that. Confirm your own date with Inland Revenue or your agent before you rely on it.

There is an annual timing problem worth planning around. IRD publishes the kilometre rates after the income year has ended — OS 19/04 (KM 2026) came out on 3 June 2026, two months after the year it covers closed, and the prior year’s statement landed on 30 May 2025. If you file in April or May you either wait or use provisional figures and correct them. The rates for the 2027 tax year (1 April 2026 – 31 March 2027) are not on Inland Revenue’s kilometre rates index as at July 2026, and on that pattern would be expected around the middle of 2027. Do not use this year’s rates for next year’s return.

How do I keep the trip log without it becoming a chore?

The claim is only ever as good as the record behind it, and vehicle records are the ones people reconstruct from memory in July for a year that ended in March. That reconstruction is what a reviewer notices.

Keel: Invoice Maker & Receipts (by Ilura Technology) is a private record-keeper for exactly this: log a trip when you finish it, photograph the fuel and servicing receipts as you get them, and send your invoices from the same app. It runs entirely on your iPhone — no account, no sign-in, no bank connection, and its App Store privacy label reads “Data Not Collected”. Receipts are read on device by Apple Intelligence to pull out the merchant, total, tax and date, and the Accountant Pack exports the year as a CSV plus a one-page summary PDF.

The honest tradeoff: nothing imports itself. There is no bank feed, so a trip gets logged because you logged it and a receipt exists because you photographed it. That is the cost of records that never leave your phone. If you invoice clients too, how to invoice as a contractor in New Zealand covers what those documents must show.

Keel’s free tier includes unlimited invoices, receipts and mileage logging; Keel Pro is a one-time $249.99 Lifetime purchase, not a subscription. Keel: Invoice Maker & Receipts on the App Store.

Frequently asked questions

What is the IRD mileage rate for 2026 in NZ? For the 2026 tax year, ended 31 March 2026, the tier one rate is $1.20 per kilometre for petrol, $1.30 for diesel, 90c for petrol hybrid and $1.22 for electric. Tier one applies to the first 14,000 kilometres the vehicle travels. Beyond that, tier two rates of 37c, 38c, 24c and 23c apply.

Can I claim mileage from home to work in New Zealand? Generally no. Inland Revenue treats travel between home and your normal workplace as a private trip, on the reasoning that where you live is your own choice. Narrow exceptions exist, mainly where your home genuinely is the base of operations or the travel is inherent in the work. Travel between two work sites in a day does qualify.

How many kilometres can I claim at the tier one rate? Tier one applies to the first 14,000 kilometres the vehicle travels in the income year, counting private and business travel together. You then claim the business proportion of those kilometres. If the vehicle did 20,000 km total and 40% was business, only 5,600 kilometres are claimable at the tier one rate.

Do I need a logbook to claim vehicle expenses in NZ? To claim more than a token amount, yes. Without a logbook, Inland Revenue limits the claim to 25% of the vehicle’s running costs, and may ask you to substantiate even that. A logbook covering at least 90 consecutive days sets a business-use percentage valid for up to three years, unless your business use changes by more than 20%.

Can I change from the kilometre rate method to actual costs? Not for the same vehicle. You must keep using one method for as long as you own that vehicle, so the choice in the first year you claim is effectively permanent. A different vehicle gives you a fresh choice. Remember the kilometre rates already include depreciation, so you cannot claim depreciation separately alongside them.

What are the NZ mileage rates for 2026-27? They have not been published. Inland Revenue sets kilometre rates after the income year ends, usually around May or June, so the rates for the year ending 31 March 2027 are expected in mid-2027. Anyone quoting them now is guessing. Check Inland Revenue’s kilometre rates page before you file.

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This article is general information, not tax advice. Consult a qualified New Zealand tax professional.