The landscape of vehicles is changing in New Zealand — and so are the rules about how we pay for roading infrastructure and how businesses claim vehicle expenses. Below is a clear guide to the updated mileage rates for the 2025 income year and what you need to do to claim correctly.
New 2025 mileage rates (per kilometre)
The rates below apply when you choose to claim business vehicle costs using the per-kilometre method (often used for privately owned vehicles used in a business).
| Vehicle type | Tier 1 rate (per km) | Tier 2 rate (per km) |
|---|---|---|
| Petrol | $1.17 | $0.37 |
| Diesel | $1.26 | $0.35 |
| Petrol hybrid | $0.86 | $0.21 |
| Electric | $1.08 | $0.19 |
What "Tier 1" and "Tier 2" mean
Tier 1 relates to the first 14,000 kilometres travelled by the vehicle in the income year. That 14,000 km is calculated on the vehicle's total kilometres for the year (business + private travel).
You must note the vehicle's odometer reading at the start of the income year and at the end of the income year so you can calculate total kilometres travelled.
How to calculate a claim when total kms exceed 14,000
If total kilometres for the year exceed 14,000, you must apportion business kilometres between Tier 1 and Tier 2. Example below shows how that works in practice.
Vehicle total kilometres for the year:
20,000 kmBusiness kilometres during the year:
3,000 kmCalculation steps:
- Portion of Tier 1 available:
14,000 / 20,000 = 0.7 - Tier 1 business kilometres:
0.7 × 3,000 = 2,100 km - Tier 2 business kilometres:
3,000 − 2,100 = 900 km - Using Petrol rates for example:
2,100 × $1.17 = $2,457.00 - Remaining:
900 × $0.37 = $333.00 - Total claim = $2,457.00 + $333.00 = $2,790.00
Record-keeping — what you must keep
To support a kilometre-based claim you should keep a log containing the details of each trip being claimed. At minimum the log should include:
- Date of the trip
- Odometer reading at the start and end of the trip (or distance covered)
- Destination
- Reason for the trip / business purpose
There are several apps that make this easy — many are available in your app store. One app of note is Driversnote, which many small businesses use to track business kilometres and produce reports for tax purposes.
Other important points
- If the vehicle travelled less than 14,000 km in the income year, you can apply the Tier 1 rate to business kilometres (because all kilometres fall into Tier 1).
- No GST can be claimed on motor vehicle expenses when you use the kilometre method — GST is not claimable on these kilometre-based reimbursements.
- Always keep your trip log and odometer records for the required tax record retention period in case of an audit.
