IRD Kilometre Rate Calculator

Worked example

Grace is a self-employed mobile dog groomer who drives her van 20,000 km over the year, split roughly evenly between client visits and personal use, so she records a 50% business-use percentage from her logbook.

Her total travel of 20,000 km sits above the 14,000 km Tier One threshold, so it is split into two bands. The first 14,000 km of total travel is claimed at Tier One, and the remaining 6,000 km of total travel is claimed at Tier Two. Applying her 50% business-use percentage to each band: 14,000 km × 50% = 7,000 business km at Tier One, and 6,000 km × 50% = 3,000 business km at Tier Two.

At the Tier One rate of $1.20 per km, her 7,000 business km are worth $8,400.00. At the Tier Two rate of 37 cents per km, her 3,000 business km are worth $1,110.00. Adding the two together gives Grace a total kilometre-rate claim of $9,510.00 for the year, across 10,000 business kilometres in total.

Why the 14,000 km cap applies to total travel, not just business travel

A common misunderstanding is that the 14,000 km Tier One threshold applies only to business kilometres. It does not. The threshold applies to the vehicle's total travel for the year, business and private combined, because Tier One is designed to cover the fixed costs of owning the vehicle, such as depreciation, insurance and registration, which apply whether a trip is for business or not. Once the vehicle's total travel for the year passes 14,000 km, the business portion of every kilometre after that is claimed at the lower Tier Two rate instead, which covers running costs only. This is why this calculator asks for total kilometres travelled first, then applies your business-use percentage to work out how many of those kilometres in each band were actually business use.

The two tiers explained

Tier One blends fixed vehicle costs with running costs into a single higher rate, on the basis that most vehicles will not travel more than 14,000 km in a year, so the fixed costs are effectively spread across all of that travel. Tier Two strips the fixed-cost component out and covers running costs only, such as fuel, tyres and servicing, because those fixed costs have already been accounted for within the first 14,000 km. If your total travel for the year is under 14,000 km, every business kilometre you claim is at the higher Tier One rate.

Kilometre rate versus claiming actual costs

The kilometre rate method is an alternative to keeping every receipt for fuel, servicing, insurance, registration, depreciation and repairs, and then apportioning the total by your business-use percentage. It suits people with moderate business use or a lower-value vehicle, since it is far less record-keeping. If you drive a high-value vehicle with heavy business use, working out your actual costs and depreciation can sometimes produce a larger deduction, but it requires complete records for every cost across the year and is more work to maintain. Compare the two using the Vehicle Running Cost Calculator before deciding which method suits your situation.

Logbooks and record-keeping

Whichever method you use, you need evidence of your business-use percentage. Inland Revenue accepts a representative logbook kept for at least 90 consecutive days, covering a typical period of your driving, which can then be applied for up to three years provided your pattern of use has not changed materially. Keep the logbook itself, along with your total odometer readings at the start and end of the year, since both feed directly into this calculator.

Who this calculator is for

This calculator is for self-employed people and sole traders claiming a deduction for using their own vehicle for business, employers reimbursing employees tax-free for using their own vehicle for work, and close companies weighing up the kilometre rate method against Fringe Benefit Tax for a vehicle also used privately by a shareholder-employee. It assumes a standard petrol or diesel vehicle and a single business-use percentage applied consistently across the year. Figures are rounded for display and are indicative only; keep your logbook and odometer records, and rely on current IRD guidance when filing your actual return.

Related calculators

• Mileage Reimbursement Calculator: a simpler version that works directly from business kilometres and editable rates.
• Vehicle Running Cost Calculator: compare against your vehicle's actual running costs.
• GST for Tradies: vehicle and other deductible expenses for tradies.
• Provisional Tax Calculator: how vehicle deductions feed into your tax instalments.
• Self-Employed Take-Home Calculator: annual after-tax income for the self-employed.

Official NZ sources

This calculator is built from primary New Zealand sources. Always confirm current figures against the official source for your situation:

• Inland Revenue (IRD): kilometre rates 2025-2026
• Inland Revenue Tax Technical: overview of the kilometre rate method
• Inland Revenue (IRD): tax for self-employed people