New Zealand's kilometre rates: $1.20 a kilometre, and the 14,000 km that counts private driving too

New Zealand pays for business driving with a per kilometre rate, much like the UK's approved mileage rate. Two details make it quite different in practice. The rate changes with the type of vehicle, and the threshold where it drops counts every kilometre the vehicle travels in the year, private driving included.

The 2025-26 rates

Inland Revenue publishes the rates after the income year has ended, using cost data from that year. The rates for the 2025-26 income year (which for most people ran from 1 April 2025 to 31 March 2026) were set by an instrument made on 2 June 2026 and published on 5 June:

Every Tier 1 rate went up on the year before. For 2024-25 they were $1.17 (petrol), $1.26 (diesel), 86 cents (petrol hybrid) and $1.08 (electric). The electric rate moved most, by 14 cents a kilometre.

Tier 1 and Tier 2

The two tiers exist because a car costs money in two different ways. Tier 1 combines the fixed costs (depreciation, insurance, registration) with the running costs (fuel, servicing, tyres). Tier 2 covers running costs only, on the reasoning that once a vehicle has done a full year's worth of driving, the fixed costs have been paid for.

Tier 1 applies to the first 14,000 kilometres the vehicle travels in the income year. Tier 2 applies to anything over that. The important word is travels: the 14,000 includes private use, not just business kilometres. You apply your business share to each part.

So for a petrol car that covers 20,000 kilometres in the year, half of them for business:

• First 14,000 km: 14,000 x 50% x $1.20 = $8,400
• Remaining 6,000 km: 6,000 x 50% x 37 cents = $1,110
• Total claim: $9,510

Compare that with the UK, where the 10,000 mile threshold counts business miles only. A British driver who does a lot of private driving still gets the full 55p rate on their first 10,000 business miles. A New Zealand driver with heavy private use reaches the Tier 2 drop sooner than their business driving alone would suggest.

Why the rate depends on the vehicle

The UK has one car rate for petrol, diesel, hybrid and electric alike: 55p a mile for the first 10,000 business miles, for journeys from 6 April 2026. New Zealand sets a separate rate for each type of vehicle, which reflects the real differences in what they cost to own and run.

The pattern in the table is worth a second look. A petrol hybrid gets the lowest Tier 1 rate, because it is cheaper to fuel without being much dearer to buy. An electric vehicle gets a Tier 1 rate above petrol, because its higher purchase price feeds the fixed cost part, but by far the lowest Tier 2 rate, because the running costs are low. The effect is that an electric car is paid well for moderate driving and less generously for very high distances.

Electric vehicles in New Zealand have also paid road user charges since 1 April 2024, bought in units of 1,000 kilometres. It is a per kilometre charge in place of the fuel excise a petrol driver pays at the pump.

Who uses the rates

The rates serve two groups.

Businesses and the self employed can use them as a simpler alternative to adding up actual vehicle costs. Instead of tracking every fuel receipt and insurance bill, you multiply your business kilometres by the published rate. You need to know your business share, which brings in the logbook (below).

Employers can use them to reimburse staff who drive their own vehicles for work. Inland Revenue's view is that some employers use the kilometre rates as a reasonable estimate of what the employee actually spent, which is what keeps the payment free of tax. The catch is timing. Because the rates are published after the year closes, any reimbursement paid now is being paid in a year whose rates do not exist yet. Inland Revenue says employers can keep using the 2025-26 rates, or any other method that gives a reasonable estimate, and that it is considering further guidance for the 2027 income year.

The 90 day logbook

To claim a business share, you need to establish it. Inland Revenue's route is a logbook kept for at least 90 consecutive days, recording:

• the start date and the odometer reading on that day
• the date, distance and reason for each business trip
• the end date and the odometer reading at the end of the period

The business percentage from that logbook can then be used for up to three years, as long as your business use does not change by more than 20%. After three years you keep a new one.

That is a lighter requirement than the UK, where HMRC expects a record of every business journey throughout the year. But it puts a lot of weight on those 90 days. If the sample period happens to be unusually quiet or unusually busy, the error is carried for three years. Keeping a full record as you go means the 90 day sample is easy to produce and easy to defend, and it shows straight away when the pattern has shifted enough to need a new one.

How it compares

For other countries' approaches, see Australia's cents per kilometre method, Canada's automobile allowance rates and UK vs US mileage rates.

Sources

• Kilometre rates 2025-2026 (Inland Revenue)
• Kilometre rates for the 2025-2026 income year (Inland Revenue news, 5 June 2026)
• Kilometre Rates for the Business Use of Vehicles for the 2025-26 income year, Instrument 2026 (Inland Revenue)
• Kilometre rates for the business use of vehicles for the 2025 income year (Inland Revenue)
• Use a logbook (Inland Revenue)
• Vehicle licensing and road user charges (govt.nz)
• Increasing mileage rates (HMRC policy paper), for the British comparison

General information, not legal or tax advice. New Zealand vehicle expense rules have conditions this article does not cover: check Inland Revenue's guidance or take advice on your own situation.