The rates set out below apply for the 2025-2026 income year for business motor vehicle expenditure claims. The Tier 1 rates reflect an overall increase in vehicle running costs in the income year.
The table of rates for the 2025-2026 income year
The Tier 1 rate is a combination of your vehicle's fixed and running costs. Use it for the business portion of the first 14,000 kilometres travelled by the vehicle in an income year. This includes private use travel. The Tier 1 rate reflects vehicle fixed ownership costs (Annual relicensing, insurance, interest on outlay, depreciation etc) and vehicle running costs (fuel, road user charges when applicable, tyres and vehicle maintenance costs).
The Tier 2 rate is for running costs only. Use it for the business portion when overall vehicle travel (both business and private) exceeds 14,000 kilometres in an income year.
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol | $1.20 cents | 37 cents |
| Diesel | $1.30 cents | 38 cents |
| Petrol hybrid | 90 cents | 24 cents |
| Electric | $1.22 cents | 23 cents |
Learn more about using kilometre rates
This note provides some clarification on the use of the Commissioner’s vehicle kilometre rates. For more detailed information, please also read Operational Statement 19/04a, 'Commissioner's statement on using a kilometre rate for business running of a motor vehicle – deductions' and 19/04b, 'Commissioner's statement on using a kilometre rate for employee reimbursement of a motor vehicle'.
Please be aware that the Commissioner is in the process of reviewing and updating these operational statements, and an updated statement will be published in due course.
Use of the rates for business vehicles
In situations where a business intends to claim expenses for a motor vehicle that is used for both business and other (private) purposes, they must calculate the proportion of business use. They can do this by either deducting the business portion of their actual motor vehicle costs (the cost method) or by using the kilometre rates set annually by the Commissioner (the kilometre rate method).
The above rates are applicable when using the kilometre rate method for calculating business use of a vehicle during the 2025-2026 income year and provide a reasonable estimate of the related expenditure for the use of a vehicle that can be claimed in that year.
Use of the rates for employee reimbursement for use of a vehicle
The Commissioner’s motor vehicle kilometre rates are set primarily to provide an alternative method for calculation of claims for vehicle expenditure by business customers. They relate to the prior income year to assist with calculating deductible expenditure for return filing for that year. However, the Commissioner understands that some employers may use the motor vehicle kilometre rates as a reasonable estimate of expenditure likely to be incurred by employees when providing reimbursements for the business use of private motor vehicles.
The kilometre rates are set each year based on information concerning vehicle expenditure in that period. Reimbursement of employee expenditure is likely to occur in the current income year where these rates may no longer be a reasonable estimate of the expenditure incurred.
To provide greater certainty to employers for determining reasonable expenditure to reimburse employees for the business use of their private vehicle, Inland Revenue is considering potential further guidance for reimbursement purposes in the 2027 income year due to the increase in fuel prices. In the interim, the 2025-2026 kilometre rates can still be used, or any other method that provides a reasonable estimate of the employee’s costs of using their private vehicle for business purposes, when considering reimbursement of an employee.
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