2025-2026 IRD Kilometre Rates: What’s Changed This Year?
The 2025-2026 IRD Kilometre Rates represent a significant update from Inland Revenue for businesses, contractors, sole traders, and employers across New Zealand. These updated rates are used to calculate deductible vehicle expenses and employee mileage reimbursements, helping taxpayers accurately account for business-related travel costs. With vehicle ownership and operating expenses continuing to change, reviewing the 2025-2026 IRD Kilometre Rates is essential to ensure compliance, maximise legitimate tax deductions, and maintain accurate financial records throughout the income year.
New IRD Update: Inland Revenue has officially released the 2025–2026 IRD Kilometre Rates, providing updated mileage rates for petrol, diesel, hybrid, and electric vehicles. These rates are used by businesses, sole traders, contractors, and employers to calculate vehicle expense deductions and mileage reimbursements. Businesses using the kilometre rate method should review the updated rates now to ensure compliance and accurate tax claims.
- Updated rates released by Inland Revenue.
- Applies to business vehicle expense claims.
- Important for contractors, tradies, consultants, and employers.
- May impact tax deductions and employee reimbursements.
- Review vehicle usage records before your next tax filing.
Latest Inland Revenue Update for NZ Businesses
Inland Revenue has released the 2025–2026 IRD Kilometre Rates, providing updated guidance for businesses claiming vehicle expenses and employers reimbursing staff for business-related travel.
The new rates reflect changes in vehicle ownership and operating costs across New Zealand and may affect tax deductions, mileage reimbursement policies, and business expense calculations for the current income year.
Businesses that regularly use vehicles for client visits, deliveries, site inspections, sales activities, or contractor work should review the new rates immediately to ensure compliance with Inland Revenue requirements.
For official guidance, refer to the Inland Revenue kilometre rates announcement .
Understanding the 2025–2026 IRD Kilometre Rates for NZ Businesses
The updated kilometre rates vary depending on vehicle type and whether Tier 1 or Tier 2 applies.
| Vehicle Type | Tier 1 Rate | Tier 2 Rate |
|---|---|---|
| Petrol | $1.20 per km | $0.37 per km |
| Diesel | $1.30 per km | $0.38 per km |
| Petrol Hybrid | $0.90 per km | $0.24 per km |
| Electric Vehicle | $1.22 per km | $0.23 per km |
Source: IRD Vehicle Expense Guidance
What Has Changed in the 2025–2026 IRD Kilometre Rates?
The latest Inland Revenue update reflects changing ownership and operating costs across various vehicle categories.
The revised rates continue the vehicle-specific approach introduced previously, with separate rates for:
- Petrol vehicles
- Diesel vehicles
- Hybrid vehicles
- Electric vehicles
These rates are designed to provide a more accurate reflection of real-world vehicle operating expenses and business travel costs.
What Are IRD Kilometre Rates?
IRD kilometre rates are published annually by Inland Revenue and provide a simplified method for calculating deductible vehicle expenses.
Instead of tracking every fuel receipt, maintenance invoice, insurance payment, and depreciation cost separately, eligible taxpayers may use the approved kilometre rates to estimate business-use vehicle expenses.
This method is commonly used by:
- Sole traders
- Contractors
- Consultants
- Small business owners
- Property managers
- Tradies
- Sales professionals
Understanding Tier 1 vs Tier 2 Kilometre Rates
Tier 1 Explained
Tier 1 includes both fixed ownership costs and operating costs.
Examples include:
- Fuel
- Insurance
- Registration
- Repairs and maintenance
- Depreciation
- Tyres
- Finance costs
Tier 1 applies to the first 14,000 kilometres travelled during the income year.
Tier 2 Explained
Once total travel exceeds 14,000 kilometres, Tier 2 rates apply.
Tier 2 only covers operating costs because fixed ownership costs have already been accounted for within Tier 1.
Who Should Review These New Rates?
The updated rates are particularly important for:
- Construction businesses
- Tradespeople
- Consultants
- Real estate professionals
- Delivery businesses
- Property investors
- Contractors and freelancers
- Businesses reimbursing staff mileage
If your business uses vehicles regularly, these updated rates may directly affect deductible expenses and reimbursement calculations.
Why the 2025-2026 IRD Kilometre Rates Matter for NZ Businesses
Vehicle expenses are one of the most common deductions claimed by New Zealand businesses.
Using outdated kilometre rates may result in:
- Incorrect tax deductions
- Inaccurate employee reimbursements
- Compliance risks
- Missed tax-saving opportunities
Reviewing your vehicle expense processes now can help ensure your business remains compliant while maximising legitimate deductions.
Related DFK Orb360 Services
- Business Advisory Services
- Tax Planning & Compliance
- Accounting Services
- Payroll Services
- GST Advisory Support
2025–2026 IRD Kilometre Rates: Frequently Asked Questions
What are the new IRD kilometre rates for 2025–2026?
Inland Revenue has released updated kilometre rates for petrol, diesel, hybrid, and electric vehicles for the 2025–2026 income year. These rates are used to calculate deductible business vehicle expenses and employee mileage reimbursements.
Who can use the IRD kilometre rate method?
The kilometre rate method can generally be used by sole traders, self-employed professionals, contractors, small businesses, and employers reimbursing employees for business travel.
What is the difference between Tier 1 and Tier 2 rates?
Tier 1 includes both ownership and operating costs and applies to the first 14,000 kilometres travelled annually. Tier 2 applies after 14,000 kilometres and covers operating costs only.
Can employers reimburse staff using these rates?
Yes. Many New Zealand employers use Inland Revenue’s kilometre rates as a reasonable basis for reimbursing employees who use their private vehicles for business travel.
Should businesses review their vehicle expense claims?
Absolutely. Businesses using vehicles regularly should review their expense claims, mileage logs, and reimbursement policies to ensure they align with the newly released Inland Revenue rates.
Why are the 2025-2026 IRD Kilometre Rates important?
The 2025-2026 IRD Kilometre Rates help businesses calculate vehicle expense deductions and employee reimbursements accurately while remaining compliant with Inland Revenue requirements.
Key Takeaways from the New IRD Update
- Inland Revenue has released the official 2025–2026 kilometre rates.
- The updated rates apply to petrol, diesel, hybrid, and electric vehicles.
- Businesses should review mileage reimbursement policies immediately.
- Vehicle expense deductions may be affected by the revised rates.
- Maintaining accurate mileage records remains essential for compliance.
Need Help Applying the 2025–2026 IRD Kilometre Rates?
Get Expert Advice from DFK Orb360
The release of the new 2025–2026 IRD Kilometre Rates may impact your vehicle expense claims, tax deductions, and employee reimbursement calculations.
Whether you’re a business owner, contractor, consultant, tradie, property investor, or employer, our experienced team can help you:
- Review vehicle expense claims
- Calculate deductible mileage accurately
- Determine whether the kilometre rate or actual cost method is more beneficial
- Improve tax compliance and record keeping
- Maximise legitimate business deductions
Speak with a DFK Orb360 advisor today and ensure your vehicle expense claims align with the latest Inland Revenue guidance.
Final Thoughts
The release of the 2025–2026 IRD Kilometre Rates is an important update for businesses, contractors, self-employed professionals, and employers across New Zealand.
As vehicle ownership and operating costs continue to evolve, Inland Revenue’s updated rates provide a practical framework for calculating vehicle expense deductions and mileage reimbursements accurately.
Businesses that review their mileage records, reimbursement policies, and tax planning strategies now will be better positioned to remain compliant and maximise available deductions throughout the 2025–2026 income year.
For personalised advice on vehicle expense claims, tax planning, and business compliance, contact the team at DFK Orb360 Chartered Accountants.