Can I Claim Motor Vehicle Expenses (New Zealand) as a Business Expense in New Zealand?
Motor vehicle costs are deductible for the business-use portion only. Sole traders can use the IRD kilometre rates (for 2025-26, petrol NZD 1.20 per km for the first 14,000 km of total travel and 37 cents per km after that) or actual costs apportioned by a 3-month logbook. Company vehicles used privately trigger FBT.
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What Inland Revenue (IRD / Te Tari Taake) says
Sole traders: maintain a 3-month logbook every 3 years to establish business use percentage, then apply that percentage to actual costs. Alternatively, use IRD kilometre rates for 2025-26. Tier 1 covers fixed and running costs for the first 14,000 km of total vehicle travel (including private travel): petrol NZD 1.20, diesel NZD 1.30, petrol hybrid NZD 0.90 and electric NZD 1.22 per km. Tier 2 covers running costs only above 14,000 km: petrol 37 cents, diesel 38 cents, petrol hybrid 24 cents and electric 23 cents per km. Companies: deduct actual costs but apply FBT on private use by employees or shareholders at 20% of vehicle cost per quarter, taxed at the FBT rate.
When you can claim
- Sole trader: business kilometres at the IRD Tier 1 rate (NZD 1.20 for petrol in 2025-26) for the first 14,000 km of total travel, then the Tier 2 rate
- Sole trader: actual costs (fuel, insurance, registration, WOF, maintenance, depreciation) proportioned by logbook business use percentage
- Company: full actual vehicle costs deductible, with FBT charged on the private-use portion provided to employees or shareholder-employees
When you cannot claim
- Private travel, including ordinary commuting between home and a regular workplace
- Travel costs for a spouse or family member unless they are employed in the business and travelling for a genuine business purpose
- Additional depreciation or petrol claims when already using the mileage rate method: the rate covers all running costs
Good to know
Pro tip: Keep a 3-month logbook at least once every 3 years to validate your business-use percentage. Digital apps that use GPS to log journeys are accepted by IRD and make this effortless.
Important: Electric vehicles lost their FBT exemption from 1 April 2025 and are now subject to standard FBT rules. Company vehicles available to a director even just on weekends trigger FBT for the full period of availability. IRD publishes the kilometre rates after each income year ends on 31 March, so the rates for 2026-27 are not yet set. The rates already include depreciation, so a separate depreciation claim cannot be added. Self-employed people using kilometre rates do not need to consider GST.
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