Mileage Rate 2025 NZ: IRD Kilometre Rates Explained

Anyone with a work ute or a side-hustle car knows that the per-kilometre rate you claim can feel like a guessing game — until Inland Revenue publishes its official numbers, and for the 2025–2026 income year, IRD has quietly doubled the complexity of its kilometre-rate system, moving from four to eight rates so you can match a petrol, diesel, hybrid, or electric vehicle against the right figure. This guide unpacks both the 2024–2025 and 2025–2026 rate tables, compares them with the AA’s independent running-cost benchmarks, and walks you through exactly how to calculate what you should charge or claim per km.

IRD Tier 1 petrol rate 2025–2026: $1.20 per km ·
IRD Tier 1 diesel rate 2025–2026: $1.30 per km ·
IRD Tier 1 petrol rate 2024–2025: $1.17 per km ·
IRD rate structure: 4 vehicle types × 2 tiers = 8 rates ·
Tier 1 threshold: 14,000 km per vehicle per year

One key number to understand before you start: the Tier 1 threshold of 14,000 km per vehicle per income year. That single cut-off controls which rate you apply to your business kilometres, so getting it right changes your total deduction by hundreds of dollars (Inland Revenue).

The clearest signal in these numbers is the electric-vehicle jump — up 13 cents in a single year — while petrol’s Tier 2 rate stayed frozen at 37 cents. That pattern tells you where running costs are actually heading, not just what the headline rate looks like (Inland Revenue).

Tier 1 is used for the business portion of the first 14,000 kilometres travelled by the vehicle in an income year.

What are the current IRD mileage rates in New Zealand?

Inland Revenue publishes two tiers of kilometre rates for four vehicle types — petrol, diesel, petrol hybrid, and electric — which means eight distinct figures you could be applying depending on your vehicle and how far you’ve driven this income year (Inland Revenue).

IRD mileage rates for 2024–2025

For the 2024–2025 income year, the petrol Tier 1 rate sat at $1.17 per km, with a Tier 2 rate of 37 cents per km. Diesel drivers claimed $1.26 Tier 1 and 35 cents Tier 2, petrol hybrids earned 86 cents Tier 1 and 21 cents Tier 2, and electric vehicles brought in $1.08 Tier 1 and 19 cents Tier 2 (Inland Revenue).

IRD mileage rates for 2025–2026

The 2025–2026 rates show petrol at $1.20 Tier 1 and 37 cents Tier 2, diesel at $1.30 Tier 1 and 38 cents Tier 2, petrol hybrids at 90 cents Tier 1 and 24 cents Tier 2, and electric vehicles at $1.22 Tier 1 and 23 cents Tier 2 (Inland Revenue).

What this means: the diesel rate now leads the pack at $1.30, reflecting higher fuel prices, while electric vehicles have seen the sharpest single-year increase. If you own an EV, that rate bump is worth reviewing before you file.

What is the current mileage rate for 2026 in NZ?

For the 2025–2026 income year (which runs from 1 April 2025 to 31 March 2026), the current petrol Tier 1 rate is $1.20 per km (Inland Revenue). This is the benchmark you’ll most commonly see cited for employer reimbursements and standard mileage claims.

What this means: the $1.20 rate is just the starting point; high-mileage drivers need to factor in the Tier 2 reduction.

What are the current AA mileage rates in New Zealand?

While IRD sets the tax-deduction benchmark, the New Zealand Automobile Association (AA) publishes its own independent running-cost rates, which work differently — they’re calculated per specific vehicle make and model rather than as a flat per-km figure (AA New Zealand).

AA’s running-cost rates are calculated per specific vehicle make and model rather than as a flat per-km figure.

What are the new AA rates for 2026?

AA’s 2026 rate tables are published at aa.co.nz and vary by vehicle age, fuel type, and model. Unlike IRD’s single per-km rate per vehicle type, AA breaks down running costs for individual vehicles, giving a more precise figure for private reimbursement or internal cost tracking (AA New Zealand).

AA rates vs IRD rates

The two systems serve different purposes: IRD rates are the official tax benchmarks you should use for claiming deductions and reimbursing employees tax-free, while AA rates reflect what it actually costs to run a specific vehicle. For accurate budgeting, AA’s figures are more granular; for tax compliance, IRD’s are the only ones that matter.

Where to find the official AA mileage rate table

AA publishes its running-cost tables on its official website, which you should check directly for the latest figures rather than relying on third-party summaries. The rates shift annually and are tied to model-specific data.

Why this matters: the gap between AA’s model-specific costs and IRD’s flat rates is where the real planning happens — a frugal hybrid owner might find the IRD rate overstates their costs, while a thirsty ute owner could be under-claiming.

How to calculate mileage cost in NZ?

The formula is simple once you have your vehicle type and annual kilometres sorted: multiply your business kilometres by the applicable Tier 1 or Tier 2 rate. For the 2025–2026 year, that means $1.20 per km for petrol vehicles up to 14,000 km per year, then 37 cents per km beyond (Inland Revenue).

1. Identify your vehicle’s fuel type (petrol, diesel, hybrid, or electric) and confirm it’s a car or van (heavy vehicles fall outside this rate schedule).
2. Record your total annual kilometres driven and the percentage used for business (based on your 90-day logbook).
3. Separate the first 14,000 km of total travel from any excess above 14,000 km.
4. Multiply the business portion of the first 14,000 km by the applicable Tier 1 rate, and the business portion of any excess by the applicable Tier 2 rate.
5. Add the two amounts to get your total deductible mileage cost for the income year.

How to calculate the running cost of a car?

To calculate a car’s running cost, you need to know your total annual kilometres and your vehicle type. For example, if you drive a petrol car 20,000 km a year and 60% is for business, your claim is: (14,000 × 60% × $1.20) + (6,000 × 60% × $0.37) = $10,080 + $1,332 = $11,412 for the year (Inland Revenue).

How to calculate cost per km for trucks?

Trucks and heavy vehicles sit outside the standard IRD kilometre rate schedule, which is designed for cars and light vans. If you’re running a truck, you’ll need to check the specific tables or use the logbook method to establish actual running costs, as flat rates for heavy vehicles aren’t part of the standard Tier 1/Tier 2 structure (Inland Revenue).

Mileage rate 2025 nz calculator

You can build your own calculator with a spreadsheet: multiply business km by the Tier 1 rate up to 14,000 km, then switch to Tier 2 for anything above. The IRD website’s official rates page is the reference point for the figures you plug in (Inland Revenue).

Logbook, odometer, and record-keeping rules

To use the kilometre rate, you need a 90-day logbook to establish your business-use percentage, updated every three years, plus odometer readings at the start and end of the income year. IRD requires these records to support your claim if it’s ever reviewed (Inland Revenue).

The Trade-off: The flat-rate method is simple, but it locks you into a single per-km figure. For a business with a fuel-hungry fleet, the logbook method comparing actual costs against revenue might produce a bigger deduction — just with more paperwork.

What are the current vehicle running costs per kilometer in New Zealand?

IRD’s Tier 1 rates bundle all running costs into a single figure — fuel, insurance, maintenance, repairs, and depreciation are all covered by the one rate. You can’t claim those expenses separately on top of the kilometre rate; it’s an all-in package (Inland Revenue).

What is the current rate per km?

For the 2025–2026 income year, the current Tier 1 rates per km are: petrol $1.20, diesel $1.30, petrol hybrid 90 cents, and electric $1.22. Tier 2 rates are 37c, 38c, 24c, and 23c respectively (Inland Revenue).

How much per km to run a truck?

Running a truck per km costs more than the standard car rates because of higher fuel consumption, heavier maintenance, and faster tyre wear. IRD’s car and van rates don’t cover heavy vehicles, so you’ll need the actual-cost method or specific heavy-vehicle tables to pin down a realistic per-km figure (Inland Revenue).

What the Tier 1 rate includes: fuel, tyres, maintenance, insurance, depreciation

IRD describes Tier 1 as covering both fixed and running costs, while Tier 2 covers running costs only. That distinction matters when you’re deciding which rate to apply, because Tier 1’s higher figure is meant to absorb everything from registration to servicing, not just the fuel you burn (Inland Revenue).

Note: The EV rate increase from $1.08 to $1.22 reflects rising electricity and charging infrastructure costs, even though there’s no fuel bill to cover. That’s the clearest sign that electric running costs are no longer the bargain they used to be.

What should I charge per km?

The IRD kilometre rate is the benchmark for tax-free employee reimbursements — if you pay an employee the IRD rate or less for business travel, it’s generally tax-free. Charge above it, and the excess could be treated as taxable income (Deloitte New Zealand).

Reimbursing employees at the IRD rate

For 2025–2026, the standard reimbursement for a petrol car is $1.20 per km for the first 14,000 km per vehicle per year. Employers who stick to this figure avoid creating extra PAYE obligations, making it the cleanest way to handle mileage reimbursements (Inland Revenue).

Charging clients and customers for vehicle use

If you’re a contractor charging clients per km, you’re not bound by IRD rates — but matching them is a sensible baseline. The 2025–2026 petrol rate of $1.20 per km is a defensible starting point that keeps your pricing aligned with what employees get, though you can charge more if your actual costs are higher.

Self-employed mileage claims: kilometre rate vs logbook

Self-employed drivers can choose the kilometre-rate method (quick, no detailed records beyond the logbook) or the logbook method (actual costs with full expense tracking). The kilometre rate is almost always simpler, and the 2025–2026 figures are designed to reflect real-world running costs closely enough that most drivers don’t gain much from the logbook alternative (Driversnote New Zealand).

The implication: sticking to the IRD rate keeps reimbursements tax-free, but contractors charging clients may need a higher rate to cover actual costs.

Timeline signal

Kilometre rates move on a fixed yearly schedule, and knowing the dates helps you plan claims and budget for vehicle costs.

• 1 April 2024 — 2024–2025 IRD kilometre rates take effect (Inland Revenue)
• 31 March 2025 — 2024–2025 income year ends (Inland Revenue)
• 1 April 2025 — 2025–2026 IRD kilometre rates take effect (petrol $1.20, diesel $1.30 Tier 1) (Inland Revenue)
• 31 March 2026 — 2025–2026 income year ends (Inland Revenue)
• 1 April 2026 — 2026–2027 income year begins; updated rates apply (Inland Revenue)

The pattern here is one of steadily rising rates, driven by fuel prices and EV charging costs. The catch for drivers: rates lag real-world cost increases by up to a year, so claiming slightly below your actual per-km cost is the norm rather than the exception.

Frequently asked questions

For the self-employed driver in a petrol car doing under 14,000 business km a year, the choice is clear: use the $1.20 per km rate and bank the simplicity, or track every receipt and risk a smaller deduction. For employers, the decision is equally straightforward — match the IRD rate exactly to stay compliant and keep your team happy (Best Invoicing Software for Freelancers), or venture above it and accept the tax consequences (Short Term Loans NZ: Rates, Rules & How to Get Approved).