Electric and hybrid vehicles may reduce fuel costs and emissions, but the tax rules are not always simple. What your business can claim depends on who owns the vehicle, how much it is used for business, who pays the running costs, and whether charging power comes from the electricity grid or a solar system.
Choose one claim method
In simple terms: use kilometre rates if you want an easier claim based on your travel records. Use actual costs if you are prepared to keep detailed invoices and charging records and this is likely to give a better result. Talk to us before choosing, because you will generally need to keep using the same method for that vehicle while you own it.
You generally have two ways to calculate the business claim. Choose carefully, because the method normally stays with that vehicle while you own it.
Actual costs: Keep invoices and other evidence for charging, petrol, insurance, repairs, registration, interest and any other vehicle costs. Add these costs together, then claim the percentage that relates to business use. Depreciation is calculated separately. This method may suit a vehicle with high running costs or high business use, but it requires detailed records. If you are GST-registered, you can generally claim GST only on the portion of each cost that relates to your taxable business activity.
Kilometre rates: Record the total kilometres travelled by the vehicle and the kilometres travelled for business. Then apply Inland Revenue’s rate for the relevant income year. For 2025–26, the Tier 1 rate for the first 14,000 total kilometres is $1.22 per kilometre for an electric vehicle and 90 cents per kilometre for a petrol hybrid. Lower Tier 2 rates apply after the vehicle has travelled more than 14,000 kilometres in total. Private kilometres count towards this limit. Because the rates already include running costs and depreciation, you cannot also claim electricity, petrol, repairs or depreciation.
Tier 1 (first 14000 km) | Tier 2 rate (over 14000 km) | |
|---|---|---|
Petrol | $1.20 | 37 cents |
Diesel | $1.30 | 38 cents |
Petrol hybrid | 90 cents | 24 cents |
Electric | $1.22 | 23 cents |
A plug-in hybrid uses the petrol-hybrid kilometre rate. You do not divide a trip between the electric and petrol rates. Travel from home to your normal workplace is usually private travel, even if you take the vehicle home to charge it. However, stopping to charge during a genuine business trip does not turn that trip into private travel.
Who owns the vehicle?
Sole traders and partnerships: If you use your own vehicle for work, you can claim only the business-use portion. Use the claim method chosen for that vehicle. If you use the actual-cost method, keep a 90-day logbook to support your business-use percentage. Private use must be excluded from both the income tax and GST claims.
Company or trust: A company or trust can claim vehicle costs it pays while earning income, subject to the normal business-use rules. If an employee or shareholder-employee is allowed to use a business vehicle privately, fringe benefit tax (FBT) may apply. This can be the case even when private use is occasional or the vehicle is mainly electric. FBT can depend on the days the vehicle is available for private use, not only the number of private kilometres travelled. Different rules may apply to work-related vehicles that display business identification and have restrictions on private use. Some close companies may also now choose to use the motor vehicle expenditure rules instead of FBT.
Charging with solar
The vehicle, charging unit, solar panels and home battery are separate assets with separate tax questions.
Electricity bought from the grid and used to charge the vehicle can form part of actual vehicle costs, supported by usage records and power bills.
If charging uses a mix of solar and grid power, claim only the supportable paid grid portion under the actual-cost method. Use charger data, solar reports and import-meter information where available and refer to our “Solar power and tax: turn sunshine into smart records and reduced tax” blog on how to claim the appropriate depreciation claim on your solar power system.
Keep it easy to prove
Keep a 90-day logbook showing the date, distance and business reason for each trip, along with opening and closing odometer readings.
Keep vehicle purchase documents, finance agreements, registration, insurance, repairs, petrol receipts, charging-app reports and public-charging invoices.
For home charging, keep power bills and charger or smart-meter readings. Record how any reimbursement was calculated and paid.
Separate grid electricity from solar-generated power where possible, and write down any reasonable assumptions used.
Keep records for at least seven years. Refresh the logbook after three years, or earlier if business use changes by more than 20%.
A quick example
Jack is a sole-trader tradesman who drives a hybrid utility vehicle for 15,000 kilometres during the year. His logbook shows that 40% of the travel is for business. Under the kilometre-rate method, he claims 40% of the kilometres in each tier. He cannot add a separate claim for home charging.
Under the actual-cost method, Jack adds together the insurance, repairs, road user charges, fuel and electricity costs he actually paid, including measured electricity drawn from the grid for charging. He can claim 40% of those costs. He can also claim 40% of the vehicle’s depreciation separately. If the vehicle was purchased after 22 May 2025, he may also be able to claim 40% of the additional 20% Investment Boost deduction.
Bottom line: Keep records that connect each business trip with the vehicle costs and payments you are claiming. When you buy a vehicle, choose a claim method, and keep a logbook of business mileage and record of your costs. We can help you get the vehicle, GST, solar and FBT treatment right while avoiding missed claims or claiming the same cost twice.
