IRD Mileage Rate 2024: Km Rates for Business Vehicles

New Zealand’s Inland Revenue has overhauled its kilometre rate system for 2024-2025, splitting what was once a single all-vehicle Tier 1 rate into four separate rates based on fuel type. The changes — which took effect from 1 April 2024 and were formally confirmed in May 2025 — mean diesel drivers, petrol owners, hybrid users, and EV operators now each get their own deduction rate. Here’s what the numbers mean for your next tax claim.

Petrol Tier 1 rate: $1.17 per km · Diesel Tier 1 rate: $1.26 per km · Income year: 2024-2025 · Tier 1 km limit: up to 14,000 km · Petrol hybrid Tier 1: 86 cents per km

What is the km rate for 2024?

Tier 1 rates for different vehicles

For the 2024-2025 income year, Inland Revenue published vehicle-specific kilometre rates for the first time. The Tier 1 rate applies to the first 14,000 km of total travel — that includes private kilometres alongside business driving. Petrol vehicles sit at $1.17 per kilometre, while diesel drivers get $1.26 per kilometre, the highest of any fuel type (IRD Tax Technical). Petrol hybrids come in lower at $0.86 per kilometre, reflecting their generally cheaper running costs.

Electric vehicle owners are placed at $1.08 per kilometre for Tier 1 — a figure that surprised some observers given EVs’ reputation for low fuel costs, but the rate accounts for higher fixed costs associated with battery depreciation and charging infrastructure.

Tier 2 rates after 14,000 km

Once your total annual travel exceeds 14,000 km, Tier 2 kicks in at a significantly lower rate. For petrol vehicles, Tier 2 drops to $0.37 per kilometre; for diesel, $0.35 per kilometre (Inland Revenue). The reason for the drop: Tier 2 covers only running costs — fuel, tyres, maintenance — not the fixed costs that Tier 1 absorbs (depreciation, insurance, registration).

What is the mileage rate for 2024 and 2025?

Official IRD rates from taxtechnical.ird.govt.nz

Inland Revenue issued Operational Statement OS-19-04 on 30 May 2025, formally setting out the 2024-2025 kilometre rates (IRD Tax Technical). The announcement confirmed what practitioners had been anticipating: a move away from the uniform $1.04 per kilometre that applied to all vehicle types during 2023-2024.

The rates are based on third-party vehicle cost data reviewed by the Commissioner. According to the IRD, the 2024-2025 rates reflect increases driven by fuel costs — marking the continuation of an upward trend that began with the 2023-2024 increase of 9 cents, described at the time as the biggest single increase in the programme’s history.

Vehicle types covered

Four vehicle categories now have dedicated Tier 1 rates: petrol, diesel, petrol hybrid, and electric. The separation reflects a recognition that different vehicle types carry genuinely different cost profiles. Diesel vehicles attract the highest Tier 1 rate at $1.26 per kilometre because they typically incur higher fixed costs. Petrol hybrids sit lowest among the four at $0.86 per kilometre due to their fuel efficiency advantage.

What is the current rate for mileage in Ireland?

IRD NZ vs Ireland rates clarification

IRD and Ireland look similar — but Inland Revenue Department (IRD) is New Zealand’s tax agency, not Ireland’s. There is no direct Irish Revenue mechanism that mirrors the NZ kilometre rate system. Search results that surface “mileage rates in Ireland” are overwhelmingly returning New Zealand IRD content because the acronym overlap trips up automated search classification.

For New Zealand businesses, the relevant rates come exclusively from the IRD. For Irish readers, tax treatment of business mileage falls under Revenue Commissioners rules, which operate differently — typically through mileage allowance systems rather than published per-kilometre rates.

NZ IRD current km rates

New Zealand taxpayers using the kilometre rate method should apply the 2024-2025 rates published by Inland Revenue, as confirmed in the official update of 9 June 2025 (Inland Revenue). These rates apply for the income year beginning 1 April 2024 and ending 31 March 2025 for standard balance date taxpayers.

How much can you claim per mile for diesel?

Diesel Tier 1 and Tier 2

Diesel vehicles attract the highest kilometre rates of any fuel type in 2024-2025. At Tier 1, diesel is set at $1.26 per kilometre for the first 14,000 km of total travel — that’s 9 cents more than petrol ($1.17) and 40 cents more than petrol hybrid ($0.86) (DCH). The premium reflects diesel’s higher fixed ownership costs.

At Tier 2 (after 14,000 km total travel), diesel drops to $0.35 per kilometre — slightly lower than petrol’s Tier 2 of $0.37. That reversal reflects running cost reality: diesel vehicles tend to consume less fuel per kilometre, which matters more once fixed costs are already accounted for.

Claim limits and methods

To claim the full Tier 1 rate on diesel, you need a logbook recording your business and private travel throughout the year. Without a logbook, Tier 1 is capped at the first 3,500 km of business driving — beyond that, Tier 2 applies (Driversnote).

Alternatively, you can abandon the kilometre rate method entirely and claim actual vehicle costs — fuel, maintenance, insurance, depreciation, financing — with full records. This cost method suits high-mileage drivers or those with unusually expensive vehicles.

How do I calculate my work mileage in Ireland?

Steps for IRD km method

For New Zealand work mileage, the IRD kilometre rate method follows a straightforward process. First, determine your total annual travel — business and private combined. Apply Tier 1 rates to the first 14,000 km, then Tier 2 rates to anything above that threshold.

Next, identify your business proportion. If you drove 20,000 km total and 12,000 km were for business, your business proportion is 60%. Your deduction is calculated on the business portion only.

Working through the example from IRD Tax Technical: 20,000 km total at 60% business = 14,000 km Tier 1 × $1.17 × 60% = $9,828, plus 6,000 km Tier 2 × $0.37 × 60% = $1,332, totaling $11,160 (IRD Tax Technical).

Logbook vs cents per km

The logbook method gives you the full Tier 1 deduction. Your logbook needs to record odometer readings at the start and end of the year, plus entries showing each business trip’s date, destination, and purpose. A logbook that spans 90 consecutive days can represent your full year.

Without a logbook, you’re limited to 3,500 km of Tier 1 business claims. For anyone driving more than roughly 5,800 km business annually (3,500 ÷ 60% business proportion), the logbook becomes worthwhile.

How to claim IRD mileage on your tax return

Sole traders and qualifying close companies using the kilometre rate method report their deduction on the IR-3 (personal tax return) or IR-4 (company return). The claim goes in the “Business income” or “Business deductions” section, depending on whether you’re a sole trader or company. Keep your logbook (or records of odometer readings) on file — IRD can request supporting documentation.

If you’re an employee claiming work-related mileage, you typically use the IR-4E (employer’s return) reimbursement route or claim as a deduction if you’re self-employed. The kilometre rate method is not available to employees whose employer already reimburses them.

Timeline

What’s confirmed and what’s still unclear

Four things are certain about the 2024-2025 rates: the Tier 1 threshold is 14,000 km total travel, the rates differ by vehicle type, they apply from 1 April 2024, and they apply nationwide with no regional variation. Deloitte NZ noted that the expansion from four to eight distinct rates represents the most significant structural change since the programme’s inception (Deloitte NZ).

What remains less certain: the 2025-2026 rates have not yet been announced. It is unclear whether the vehicle-type separation introduced this year will persist or revert. Specific rates for non-petrol hybrid types (such as plug-in hybrids or mild hybrids) are not separately listed in the official statement.

Bottom line

For New Zealand businesses and sole traders, the 2024-2025 IRD kilometre rates introduce meaningful change: vehicle type now determines your deduction rate, and diesel drivers pull the largest Tier 1 figure at $1.26 per kilometre. If you’re claiming without a logbook, you’re capped at 3,500 km of Tier 1 business driving — so for anyone with significant work mileage, the logbook is worth the record-keeping effort. For employers with mixed fleets, expect added administrative friction, and consider whether blended averages are appropriate for vehicles where the exact type is uncertain.

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While IRD sets km rates like $1.17 for petrol vehicles, the federal IRS mileage rates provide a useful 67¢/mile benchmark for US businesses in 2024.

Frequently asked questions