Vehicle expenses are one of the largest deductions available to self-employed people in New Zealand. Whether you drive a van, ute, or sedan for your business, you can claim the business proportion of running costs — but you need to establish that proportion correctly to satisfy IRD.
Two methods: (1) Logbook — keep a 90-day logbook to establish your business use percentage, then claim that percentage of all vehicle costs for the year. (2) IRD mileage rate — 73 cents per km for the first 14,000 km, then 26 cents/km for 2025–26. The mileage rate is simpler; the logbook method may give a larger deduction for high-cost vehicles. Vehicles used exclusively for business (utes, vans with no passenger seats) can be fully claimed without a logbook.
Method 1: Logbook (Actual Cost Method)
Step 1: Keep a 90-Day Logbook
You must keep a logbook for at least 90 consecutive days (once every three years, or when usage patterns change significantly):
For every trip, record:
- Date
- Starting odometer reading
- Ending odometer reading
- Purpose of trip (business or personal)
- Destination
The logbook establishes your business use percentage.
Step 2: Calculate Business Proportion
$$\text{Business proportion} = \frac{\text{Business km over 90 days}}{\text{Total km over 90 days}} \times 100%$$
Example:
- Business km over 90 days: 4,200
- Total km over 90 days: 7,000
- Business proportion: 60%
This 60% applies to all vehicle costs for the year.
Step 3: Apply Proportion to Actual Costs
| Vehicle cost | Annual total | Business % | Claimable |
|---|---|---|---|
| Fuel | $3,500 | 60% | $2,100 |
| Insurance | $1,200 | 60% | $720 |
| Warrant of fitness | $80 | 60% | $48 |
| Registration | $160 | 60% | $96 |
| Servicing/repairs | $1,400 | 60% | $840 |
| Depreciation (see below) | $4,000 | 60% | $2,400 |
| Total claimable | $6,204 |
Method 2: IRD Kilometre Rate
A simpler alternative: multiply business km by the IRD’s set rate.
2025–26 IRD kilometre rates:
| Business km per year | Rate per km |
|---|---|
| First 14,000 km | 73 cents ($0.73) |
| Beyond 14,000 km | 26 cents ($0.26) |
Example — 12,000 business km:
- 12,000 × $0.73 = $8,760 deduction
Example — 20,000 business km:
- 14,000 × $0.73 = $10,220
- 6,000 × $0.26 = $1,560
- Total: $11,780 deduction
The km rate includes depreciation, fuel, insurance, and all running costs — so you cannot claim these separately if using the km rate.
You still need a record of business kilometres travelled (a trip log or summary) but do not need the full 90-day logbook if using the km rate.
Logbook vs Kilometre Rate — Which Is Better?
| Situation | Recommended method |
|---|---|
| High-cost vehicle (expensive car, van, ute) | Logbook — actual costs often higher than km rate |
| Low-cost vehicle | Km rate — simpler, often comparable |
| Under 14,000 business km/year | Km rate at 73c/km is often generous |
| Over 14,000 business km/year | Logbook often better (km rate drops to 26c) |
| Complex or unpredictable usage | Logbook gives a more accurate claim |
Use a spreadsheet or mileage app (TripLog, MileIQ) to track business kilometres throughout the year.
Depreciation on Vehicles
If using the logbook (actual cost) method, you also claim depreciation on the vehicle:
- Depreciation rate for cars: 30% diminishing value (DV) or 21% straight line
- Apply business proportion to the depreciation amount
Example:
- Vehicle cost: $25,000 (excl. GST)
- Depreciation at 30% DV: $7,500 in year 1
- Business proportion: 60%
- Claimable depreciation: $7,500 × 60% = $4,500
When you sell the vehicle, a depreciation recovery (if sold for more than book value) may be taxable.
Cost price limit: For vehicles used by shareholder-employees, IRD limits the depreciation base to $57,267 for vehicles acquired from 1 April 2011 onward — excess cost above this limit is not deductible.
Vehicles Used Exclusively for Business
Some vehicles are considered used wholly for business and are fully deductible without a logbook:
- Vans with no rear passenger seats
- Utes with a tray and no rear seats (not modified)
- Tractors and heavy vehicles
These vehicles have no private-use element and can be fully expensed. However, if an employee or owner uses the vehicle privately even occasionally, FBT may apply.
GST on Vehicle Costs
If GST-registered, claim the GST component of vehicle expenses at the business proportion:
- Fuel GST: (3/23) × fuel cost × business %
- Servicing GST: 15/115 × service cost × business %
- If using the km rate, no separate GST claim on vehicle running costs (the km rate is a simplified method covering all costs)
- GST on the purchase price of a business vehicle: claim at business use %
Frequently Asked Questions
My logbook shows 60% business use. Do I need to do another logbook next year?
No — a logbook is valid for three years (unless your usage changes significantly). Keep the logbook records for 7 years in case IRD requests it.
Can I claim vehicle expenses for visiting clients who are also personal friends?
Only the portion of trips that are genuinely for business. Social visits that happen to coincide with a business conversation are not fully deductible. IRD expects honest allocation.
I drive my personal car for business. Can I claim km rate even without a logbook?
Yes — the km rate does not require a 90-day logbook. You need to keep a record of business kilometres (a trip log or diary entries). The km rate covers all vehicle costs.