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.
For a vehicle used for both business and private trips, IRD's options are a logbook, a claim of 25% of running costs if no logbook is kept, or adding up actual costs. A 90-day logbook gives your business use percentage, which you can apply to actual costs or use with IRD's kilometre rates. For 2025-26 the petrol rate is $1.20 per km for the business part of the first 14,000 km the vehicle travels (private trips included), then 37 cents per km; diesel, hybrid and electric vehicles have their own rates. A vehicle used only for business can claim its full running costs.
Method 1: Logbook (Actual Cost Method)
Step 1: Keep a 90-Day Logbook
To use the logbook method, keep a logbook for at least 90 consecutive days. IRD says the logbook should record:
- The start date and the vehicle’s odometer reading on that day
- The date, distance and reason for each business journey
- The end date of the 90-day period and the odometer reading on that day
The logbook establishes your business use percentage.
Step 2: Calculate Business Proportion
Business proportion = (Business km over 90 days) ÷ (Total km over 90 days) × 100%
Example:
- Business km over 90 days: 4,200
- Total km over 90 days: 7,000
- Business proportion: 60%
This 60% is applied to all your vehicle costs. IRD says the calculation can be used for up to 3 years if the proportion of business use doesn’t change by more than 20%; after that you need another 90-day logbook.
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 Rates
Instead of adding up actual costs, you can use IRD’s kilometre rates with the business-use proportion from your logbook. IRD publishes the rates after each tax year ends.
2025-26 income year rates (IRD):
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol | $1.20 | 37 cents |
| Diesel | $1.30 | 38 cents |
| Petrol hybrid | 90 cents | 24 cents |
| Electric | $1.22 | 23 cents |
The Tier 1 rate combines fixed ownership costs (relicensing, insurance, interest, depreciation and so on) and running costs. Use it for the business portion of the first 14,000 kilometres the vehicle travels in the income year, including private travel. The Tier 2 rate is for running costs only and applies to the business portion once total vehicle travel (business and private) goes over 14,000 km.
Example (petrol vehicle, total travel under 14,000 km): the vehicle travels 12,000 km and 7,200 km of that is business. 7,200 × $1.20 = $8,640.
Example (petrol vehicle, total travel over 14,000 km): the vehicle travels 20,000 km, and business use is 60% of the kilometres in each tier. The first 14,000 km includes 8,400 business km: 8,400 × $1.20 = $10,080. The remaining 6,000 km includes 3,600 business km: 3,600 × $0.37 = $1,332. Total: $11,412.
IRD says kilometre rates include depreciation, so if you use them you do not claim a separate depreciation deduction for the vehicle. When self-employed people use kilometre rates, they do not need to consider GST. IRD also says you need to keep using one method for as long as you own the vehicle.
If You Keep No Logbook
IRD says that if no logbook is kept, the claim is limited to 25% of the vehicle’s running costs as a business expense, and you may be asked to substantiate the percentage claimed.
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
IRD says that if a vehicle is only used for business purposes, you can claim the full running costs as a business expense. If you use it for both business and personal trips, you need to allocate the costs correctly, and travelling from home to work is a personal trip.
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?
Not necessarily. IRD says your calculation can be used for up to 3 years if the proportion of business use doesn’t change by more than 20%. After that you need another 90-day logbook. Keep your records for at least 7 years.
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 use the kilometre rates without a logbook?
IRD’s guidance describes the kilometre rates as the way to calculate the claim from your logbook. If no logbook is kept, the claim is limited to 25% of the vehicle’s running costs.