Business Vehicle Expenses in NZ: Logbooks, Kilometre Rates and GST

Paying for fuel with a business card does not make all your vehicle costs tax-deductible. If you use the same vehicle for customer visits and family trips, your claim needs to reflect the business use. The amount also depends on the calculation method that applies to the vehicle and the records you keep.

This article concerns a personally owned vehicle used in a New Zealand sole-trader business. Company vehicles, employee mileage reimbursements and fringe benefit tax involve additional rules. The numerical example uses the 2025/26 income year ended 31 March 2026; it is not a projection of the rates for 2026/27.

Start with the journeys: which were for business, and what share of the total distance did they represent? Then check the expense method that applies to your vehicle. Calculate any GST from actual purchases separately. Each step answers a different part of the claim.

Establish which journeys are business journeys

Travel to customers, suppliers or a work site can have a business purpose. Ordinary travel between home and a fixed workplace is generally private. Exceptions can depend on whether home is genuinely a business base and the nature of the work, so a journey should not be labelled business travel simply because you were thinking about work while driving.

Mixed-purpose trips need enough detail to explain the distinction. Customer appointments, job records and a short note of the route can help establish the business component. A logo on the car or tools in the boot does not remove private use.

Receipts establish what was spent. They do not, by themselves, establish how much driving was for business. Inland Revenue's vehicle-expense guidance separates records of use from the calculation of expenses.

Use a representative logbook, not an unsupported percentage

Inland Revenue's logbook approach uses at least 90 consecutive days. Record the opening and closing odometer readings and the date, distance and purpose of each business journey. Business kilometres divided by total kilometres provide the business-use proportion for the period.

For example, a representative 90-day record showing 5,000 total kilometres and 3,000 qualifying business kilometres supports a 60% business-use calculation. It does not make the other 2,000 kilometres deductible. Keep the job information behind the entries so that the purpose of a trip remains understandable later.

A logbook result can be used for up to three years where the conditions remain satisfied. Inland Revenue describes a limit of no more than a 20% change in the business-use proportion and requires a new logbook after three years. A major change in working patterns can make an old sample unreliable sooner. See its logbook instructions.

Record total travel and the purpose and distance of business journeys.

Choose an expense method supported by your records

Under an actual-cost approach, eligible fuel, repairs, insurance and other vehicle costs are recorded and the business portion is determined. Allowable depreciation is considered under that method. The full purchase price or a loan principal repayment is not simply another annual running expense.

The method is a continuing choice for that vehicle. You elect to use kilometre rates by using them in the income tax return for the year you acquire the vehicle or first use it for business. That election continues until disposal; if you do not make it, the actual-cost method applies. You cannot switch between the two each year to obtain a larger deduction. Check earlier returns before preparing the current claim.

An absence of a logbook does not mean that other actual records of use should be ignored. Inland Revenue's operational statement describes the 25% business-use limitation where neither a logbook nor actual records are available. Even then, the proportion claimed must be justifiable. It is not an automatic 25% deduction for anyone who owns a car and runs a business.

The first 14,000 kilometres include private travel

Under the kilometre-rate method, Tier 1 represents fixed and running costs and applies to the business share of the first 14,000 total kilometres travelled in the year. Tier 2 applies above that total-distance threshold. It is not a separate allowance for the first 14,000 business kilometres.

Inland Revenue's published 2025/26 rates, in New Zealand dollars per kilometre, are:

Vehicle	Tier 1	Tier 2
Petrol	NZ$1.20	NZ$0.37
Diesel	NZ$1.30	NZ$0.38
Petrol hybrid	NZ$0.90	NZ$0.24
Electric	NZ$1.22	NZ$0.23

Suppose a petrol car travels 18,000 total kilometres during 2025/26 and a valid, representative logbook supports 60% business use. The business share of the first 14,000 kilometres is 8,400 kilometres. At NZ$1.20, that produces NZ$10,080. The remaining 4,000 kilometres contain 2,400 business kilometres; at NZ$0.37, that adds NZ$888. The illustrative deduction is therefore NZ$10,968.

Applying Tier 1 to all 10,800 business kilometres would overlook the private kilometres already counted towards the threshold. The NZ$10,968 is an expense deduction, not a tax refund of that amount. The rates also include depreciation, so another depreciation deduction must not be added for the same vehicle under this method.

Check the official 2025/26 rate page for the year being claimed. A rate published for an earlier income year should not automatically be carried into the next one.

Keep actual purchase records for GST rather than treating a kilometre allowance as a GST invoice.

Do not turn the mileage deduction into a GST claim

Income tax and GST answer different questions. Inland Revenue states that its kilometre rates are calculated on a GST-inclusive basis, but input GST cannot be claimed on the estimated kilometre-rate amount itself. A GST claim must be considered using actual expenditure, the required supply information and the extent of taxable business use.

For instance, taking 3/23 of the NZ$10,968 kilometre deduction and entering that as input GST is not the correct approach. Actual fuel or repair purchases may support a separate GST calculation where the requirements are met, but the mileage figure is not a substitute for those purchases and their records.

The logbook may help support the business-use allocation for both taxes. It does not prove that every cost contains deductible GST or remove adjustments arising from private use. Vehicle acquisition and later changes in use also need their own assessment. The distinction is explained in IRD's vehicle-expense operational statement, with broader rules in its GST adjustment guidance.

Before completing the return, reconcile the year's total kilometres, business-use evidence, chosen method and actual expense records. A defensible deduction should explain not just that money left the account, but why the claimed amount relates to earning business income.

For households receiving Working for Families, changes in net business profit can also affect estimated family income. Our income and payment guide explains that separate calculation.

Disclaimer: This article provides general New Zealand tax and accounting information, not personalised advice. Eligibility and tax treatment depend on your circumstances and the rules applying to the relevant period. Obtain professional advice before acting.