Vehicle Logbook Rules for NZ Tax Claims: What IRD Requires

If you use a vehicle for business purposes, you are entitled to claim a tax deduction for the business portion of your vehicle costs. But IRD has specific requirements for how you substantiate that claim — and getting it wrong can mean your deduction is disallowed.

Here is a clear guide to the rules.

There are two ways to claim vehicle expenses in New Zealand:

1. The mileage rate method — claim a set rate per kilometre for business travel
2. The actual cost method — claim the actual costs of running the vehicle, apportioned by business use percentage

The right method depends on your situation. Here is how each works.

IRD sets a mileage rate each year that covers all vehicle running costs — petrol, insurance, registration, maintenance, and depreciation. You simply multiply your business kilometres by the rate.

Current IRD mileage rates (2024/25):

Example: You drive 8,000 km for business in the year. Your deduction is 8,000 × $1.04 = $8,320.

To use the mileage rate, you need to keep a record of:

• The date of each business trip
• The destination
• The purpose of the trip
• The number of kilometres travelled

A simple spreadsheet or a mileage tracking app works fine. You do not need a full logbook for the mileage rate method.

• The rate is designed to cover all costs — you cannot claim additional expenses on top of it
• If your actual costs are higher than the mileage rate (e.g. you drive a large, expensive vehicle), the actual cost method may give you a larger deduction
• The 14,000 km threshold resets each year per vehicle

Under this method, you calculate the total cost of running the vehicle and claim the percentage that relates to business use.

Total vehicle costs include:

• Petrol and diesel
• Insurance
• Registration and WOF
• Repairs and maintenance
• Loan interest (if the vehicle is financed)
• Depreciation

Business use percentage is calculated using a logbook.

To use the actual cost method, IRD requires you to keep a logbook for a minimum 90-day test period. This establishes your business use percentage, which you then apply to your total vehicle costs for the full year.

For every trip during the 90-day period, you must record:

• Date of the trip
• Start and end odometer readings (or distance travelled)
• Destination
• Purpose of the trip (business or private)

Private trips do not need destination or purpose — just the distance.

You also need to record the odometer reading at the start and end of the 90-day period, and the total kilometres travelled during the period.

Once you have completed a 90-day logbook, the business use percentage it establishes is valid for three years — as long as your vehicle use pattern does not change significantly.

If your business use changes materially (e.g. you start working from home more, or you take on a role that requires more travel), you should complete a new logbook.

IRD does not require a specific format. You can use:

• A paper logbook (available from stationery stores)
• A spreadsheet
• A smartphone app (many options available — TripLog, MileIQ, Driversnote)

The key is that the records are contemporaneous — recorded at the time of the trip, not reconstructed later. IRD is sceptical of logbooks that appear to have been filled in all at once.

At the end of the 90-day period:

1. Add up all business kilometres
2. Divide by total kilometres for the period
3. Multiply by 100 to get your business use percentage

Example: During your 90-day logbook period, you drove 4,200 km in total. Of those, 2,940 km were for business. Business use = 2,940 ÷ 4,200 = 70%.

You then apply 70% to your total annual vehicle costs to calculate your deduction.

Business travel includes:

• Travelling between business locations
• Visiting clients or customers
• Travelling to suppliers
• Attending business meetings, conferences, or training
• Travel that is an inherent part of your work (e.g. a tradesperson travelling between job sites)

Private travel includes:

• Commuting from home to your regular workplace (this is private travel, not business)
• Personal errands
• Holidays

The home-to-work commute is the most common mistake. Unless your home is your principal place of business (e.g. you run your business from a home office), the trip from home to your first work destination is private.

If you use more than one vehicle for business, you need to keep separate records for each vehicle. The business use percentage and total costs are calculated per vehicle.

If your employer provides you with a vehicle that you also use privately, the private use component is subject to Fringe Benefit Tax (FBT) — paid by the employer. This is a separate regime from the employee claiming vehicle expenses.

If you are a shareholder-employee using a company vehicle, FBT rules apply to the private use of that vehicle. See our article on FBT for NZ small business for more detail.

IRD can audit your tax returns for up to four years after the return is filed (longer if fraud is suspected). You should keep your vehicle logbooks and expense records for at least four years.

1. Not keeping contemporaneous records — filling in the logbook from memory weeks later is not acceptable
2. Including commuting as business travel — home to work is private unless home is your principal place of business
3. Claiming 100% business use — IRD is sceptical of 100% business use claims unless the vehicle is genuinely never used privately
4. Losing receipts — keep fuel receipts, service invoices, and insurance documents
5. Not updating the logbook — if your travel pattern changes significantly, redo the logbook

For most sole traders and small business owners with a standard vehicle, the mileage rate is simpler and often produces a comparable result. For business owners with expensive vehicles or very high business use, the actual cost method may produce a larger deduction.

Vehicle expenses are one of the most commonly audited deductions in New Zealand. Getting the records right from the start means you can defend your claim with confidence.

If you are unsure which method suits your situation, or you want help setting up a record-keeping system, contact Eastmure & Associates. We work with business owners and sole traders across Christchurch and Canterbury.