Reference
Last updated: May 2026
IRD kilometre rates let businesses, the self-employed and employers work out a deduction or a reimbursement for the business use of a vehicle, without keeping every fuel and repair receipt. Tier One covers the first 14,000 km of total travel in a year (fixed plus running costs); Tier Two applies to business travel beyond that (running costs only). The rates below are for the 2024-2025 income year.
Fuel Cost Calculator GST for Tradies Provisional Tax Calculator| Vehicle type | Tier One (first 14,000 km) | Tier Two (over 14,000 km) |
|---|---|---|
| Petrol or diesel | Petrol 117c, Diesel 126c per km | Petrol 37c, Diesel 35c per km |
| Petrol hybrid | 86c per km | 21c per km |
| Electric | 108c per km | 19c per km |
The Tier One rate is a blend of your vehicle's fixed costs (such as depreciation, insurance and registration) and its running costs (fuel, servicing, tyres). It applies to the first 14,000 km your vehicle travels in the income year, across both business and private use. Tier Two is running costs only and applies to the business portion of any kilometres above 14,000. You apply your business-use percentage to the result.
| User | How they use it |
|---|---|
| Self-employed / sole traders | Claim a deduction for business use of a vehicle, as an alternative to actual costs with a logbook |
| Employers | Reimburse employees tax-free for work-related use of their own vehicle |
| Close companies | May use the kilometre rate method instead of FBT for one or two vehicles in some cases |
To use the kilometre rates you generally need a logbook or a reasonable record of business use. If business travel is high, keeping actual costs may give a larger deduction; the kilometre rate is simpler but capped.
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