If you’re a sole trader using your car for work, the mileage method is hands-down the easiest way to claim vehicle expenses. No fuss, just a simple calculation that gets you tax relief without the headache.
Here’s everything you need to know about claiming vehicle expenses using the mileage method.
What is the mileage method?
The mileage method is one of the simplest ways to claim vehicle expenses as a sole trader.
Instead of tracking every single receipt for petrol, maintenance, and insurance, you just multiply the number of business kilometres you’ve travelled by the IRD’s set rate for that financial year. Easy as!
To use this method, you’ll need to keep a logbook tracking your business trips, recording where you’re going, why, and your odometer readings at the start and end of each journey.
What’s covered by the mileage method?
The beauty of the mileage method is that it covers pretty much all expenses related to running your car.
The rate (as set by the IRD) already includes:
- Petrol
- Maintenance and repairs
- Registration
- Insurance
- Road User Charges (RUCs)
- WOF costs
- Depreciation
Basically, all your car running costs are rolled into that per-kilometre rate. Simple!
That in mind, there are a few limitations:
Two-tier rate system
The mileage method uses a two-tier rate system:
- The tier 1 rate applies to any work-related trips within your first 14,000km. This rate covers both fixed and running costs.
- 💡 For calculation purposes, your first 14,000km includes personal trips as well as work trips, even though you can only claim mileage for your work-related trips!
- The tier 2 rate applies to any work-related travel over the initial 14,000km. This rate only covers running costs.
Vehicle type matters
The mileage method only applies to petrol, diesel, hybrid, and electric vehicles. Each vehicle type has different rates, so make sure you’re claiming the right one for your car!
If your vehicle runs on something else (we’re not sure what that would be, but if you’re driving a spaceship do let us know), you’ll need to use the actual costs method instead.
Logbook required
You’ll need to keep a logbook recording:
- Where you’re going and why for each business trip
- Odometer readings at the beginning and end of every journey
- Total distance in kilometres you’ve travelled
- Odometer readings for the beginning and end of the logbook period
Remember, you can only claim kilometres when you use your car for business trips. Personal trips don’t count!
💡 For more on claiming vehicle expenses, including the actual costs method, check out our article on vehicle expenses for sole traders.
What you can’t claim when using the mileage method
Here’s the important bit: because the mileage rate already includes all your car expenses, you can’t double-dip.
That means if you’re using the mileage method, you can’t also claim:
- Individual fuel receipts
- Separate insurance costs
- Registration fees
- WOF costs
- Maintenance and repair bills
- Depreciation on your vehicle purchase
It’s all bundled into that per-kilometre rate already!
Like with other vehicle expense claiming methods, you also can’t claim fines, parking tickets, or towing fees. Even if you cop them while working, they’re not claimable expenses. Sorry!
Mileage rates
Rates can change, so it’s always worth checking the IRD website for the current rate for the year you’re claiming.
The IRD releases their kilometre rates around May each year, after the financial year is over.
Mileage rates 2025
For the 2024/25 financial year (1 April 2024 to 31 March 2025), the mileage rates were:
| Vehicle type | Tier 1 rate (first 14,000km) | Tier 2 rate (over 14,000km) |
|---|---|---|
| Petrol | $1.17 per km | $0.37 per km |
| Diesel | $1.26 per km | $0.35 per km |
| Petrol hybrid | $0.86 per km | $0.21 per km |
| Electric | $1.08 per km | $0.19 per km |
Mileage rates 2024
For the 2023/24 financial year (1 April 2023 to 31 March 2024), the mileage rates were:
| Vehicle type | Tier 1 rate (first 14,000km) | Tier 2 rate (over 14,000km) |
|---|---|---|
| Petrol or diesel | $1.04 per km | $0.35 per km |
| Petrol hybrid | $1.04 per km | $0.21 per km |
| Electric | $1.04 per km | $0.12 per km |
Need an easy way to track your kilometres? Use Mileage by Hnry!
Mileage by Hnry is an app that automates the process of tracking, well, miles.
It’s completely free for all Hnry users, and for those yet to join Hnry, it’s a minimal monthly subscription of $4.99 monthly or $55 a year – which is totally worth it when you think about how much you could save on your final tax bill.
But using Mileage with Hnry is where the real magic happens. You’ll be able to raise vehicle expenses that are completely compliant with IRD requirements, in just a few clicks.
So, what are you waiting for? Try out Mileage by Hnry today!
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