If you drive for Uber, Didi, or Zoomy in New Zealand, your car is probably your biggest cost. Petrol, servicing, tyres, registration — it all adds up really fast. The good news is, you can claim a big chunk of those costs back on your tax return and lower your tax bill.

But here's the thing — there are different ways to claim your vehicle expenses. And depending on which method you use, you could end up saving a lot more money or a lot less. Some drivers just guess and hope for the best. Others let IRD decide for them (which is usually the worst option).

In this guide, we are going to explain everything in simple plain English. No confusing tax jargon. By the end, you will know exactly which method is better for you.

Why Can You Claim Vehicle Expenses at All?

When you drive for Uber or any rideshare platform in New Zealand, you are treated as a self-employed contractor. This is different from being an employee. No one takes tax out of your pay automatically.

Because you are self-employed, IRD lets you deduct the costs of running your business from your income. And since your car is your business tool — just like a tradesperson's toolbox — you can deduct the portion of your car costs that relate to your rideshare work.

You can't claim 100% of your car costs though, because you probably use your car for personal trips too — going to the supermarket, picking up the kids, that kind of thing. You can only claim the business portion.

The 3 Methods IRD Allows

IRD gives rideshare drivers three ways to claim vehicle expenses:

• The Kilometre Rate Method (also called the mileage rate method)
• The Actual Cost Method (also called the logbook method or cost method)
• The 25% Rule (no logbook — but very limited)

Most drivers will choose between the first two. The 25% rule is really just a fallback for people who haven't kept any records at all. We strongly recommend you never rely on it.

Method 1: The Kilometre Rate Method

This is probably the easiest method to understand. Instead of collecting every single receipt for petrol, oil changes, tyres and insurance, you just count how many kilometres you drove for work and multiply that by IRD's official rate.

IRD sets this rate every year. For the 2024-2025 tax year, IRD actually updated how these rates work — they now have separate rates depending on what type of car you drive.

The 2024-2025 Kilometre Rates (Tier 1 — First 14,000 km)

The Tier 1 rate is for your first 14,000 km of travel each year (this includes both business and personal trips combined). The Tier 2 rate kicks in for any travel beyond that.

The reason the 14,000 km threshold includes personal trips is a bit confusing. Think of it this way — IRD uses the total km your car travels to decide which tier applies. But you only claim the business portion of those km.

How to Calculate Your Deduction Using This Method

Here is a simple step-by-step example:

• Your petrol car travels 18,000 km total in the year
• Your logbook shows 65% of your driving is for rideshare work
• Business km = 18,000 x 65% = 11,700 km
• All 11,700 business km fall within the first 14,000 km tier
• Deduction = 11,700 x $1.17 = $13,689

That is almost $13,700 you can deduct from your taxable income. If your tax rate is 17.5%, that saves you around $2,395 in tax. Not bad at all.

What Are the Pros and Cons?

Method 2: The Actual Cost Method (Logbook Method)

This method is a bit more work but it can save you more money, especially if you drive a newer or expensive car. Instead of using a set rate per km, you claim your real, actual vehicle running costs — then multiply them by your business use percentage.

What Counts as a Vehicle Running Cost?

Here is a full list of what you can include in your actual cost calculation:

• Petrol and diesel
• Car servicing and repairs
• Tyres and warrant of fitness (WOF)
• Vehicle registration and licence
• Car insurance (business portion)
• Loan interest (if you bought the car on finance)
• Depreciation (the drop in your car's value over time)
• Car wash and cleaning (for rideshare presentation requirements)
• Parking costs during work trips

How Does Depreciation Work?

Depreciation is the loss in value of your car over time. Because your car slowly wears out, IRD allows you to claim this as an expense each year.

For most cars, IRD uses a depreciation rate of around 21% per year on the reducing value. So if your car is worth $20,000, you might claim roughly $4,200 in depreciation in year one. The next year it would be on the lower value, and so on.

This is one of the big advantages of the actual cost method for drivers with newer, more expensive cars. Depreciation can be a very large deduction.

Real Example of the Actual Cost Method

Let's say you drove 20,000 km this year and your logbook shows 70% for business.

In this example, the actual cost method gives you $8,715 as a deduction.

Logbook vs. Kilometre Rate — Side By Side Comparison

Now lets put both methods side by side using the same driver to see which one wins.

Example Driver: Sarah

• Full-time Uber driver in Auckland
• Drives a 2022 petrol Toyota Camry (valued at $28,000)
• Total km driven: 22,000 per year
• Business use percentage: 75% (16,500 km for work)

When Does the Actual Cost Method Win?

The actual cost method tends to work better when:

• Your car is brand new or expensive (higher depreciation = bigger deduction)
• You don't drive that many km but your running costs are high
• You have a car loan with high interest
• You drive a diesel car with very high fuel costs

The km rate method tends to win when you drive a lot of km, especially if your car is older and has low depreciation value left.

The Logbook — Why You Need It No Matter What Method You Use

Here is something a lot of drivers don't realise. Even if you use the kilometre rate method, you still need to keep a logbook. The logbook is what proves to IRD how much of your driving is for business vs personal use.

What Does a Logbook Need to Include?

• The date of each trip
• The starting point and destination
• The reason for the trip (e.g. Uber passenger trip, airport pickup)
• The odometer reading at the start and end of each day
• The total km driven for that trip

How Long Do You Need to Keep It?

You must keep a logbook for at least 90 consecutive days every three years. The 90-day period is used to work out your average business use percentage. You can then use that percentage for the next three years, as long as your driving habits don't change significantly.

What About Apps? Can I Use My Phone?

Yes! There are apps that can do your logbook automatically. Apps like Logmate (popular with NZ rideshare drivers), Google Maps history export, or even the Uber Driver app trip history can all help you build a logbook.

Just make sure whatever records you keep contain all the required information. A basic app that just records distances is not always enough on its own.

The 25% Rule — What It Is and Why You Should Avoid It

If you don't keep a logbook at all, IRD will limit your vehicle expense claim to just 25% of your total running costs. That's it. No more.

For a full-time Uber driver who uses their car 70-80% of the time for work, this is a really bad outcome. You could be leaving thousands of dollars on the table every year.

The 25% rule exists as a kind of safety net for casual or very occasional business drivers. For rideshare drivers who rely on their car to earn income, it almost never makes sense to fall back on this option.

Which Method Is Right for You? A Simple Decision Guide

Not sure which method to pick? Use this simple guide:

Other Vehicle Expenses You Shouldn't Miss

On top of your main vehicle deduction, there are a few other car-related costs that drivers often forget to claim:

Cleaning and Grooming

Uber and other platforms have standards for how clean your car needs to be. Regular car washes, vacuum cleaning and interior cleaning products are all legitimate business expenses. Keep the receipts.

Dash Cam

If you bought a dash cam for safety while doing rideshare work, the cost of the dash cam can be depreciated as a business asset. The same goes for phone mounts, portable chargers and other accessories you use specifically for work.

Parking Costs

If you pay for parking while waiting for passengers — for example, at an airport holding area — those parking costs are deductible. However, if you park somewhere for a personal reason during a work shift, that part is not claimable.

Tolls

Any road tolls you pay during a work trip (while carrying a passenger or on the way to pick one up) are deductible. Keep a record of when and why you went through the toll.

A Word About GST and Vehicle Expenses

This is an area that trips up a lot of drivers, so let's keep it simple.

If you use the Kilometre Rate Method: You do not need to worry about GST on your vehicle expenses at all. IRD has already factored it in. This is one of the reasons the kilometre rate method is so simple.

If you use the Actual Cost Method: You need to separate the GST from your expenses when doing your GST return (if you are GST registered). For example, if your petrol bill is $115, the GST portion is $15 and the tax-exclusive amount is $100.

If you are not GST registered, you just use the total cost including GST in your income tax calculations.

What Happens If IRD Audits You?

Most drivers never get audited, but it does happen. IRD already receives income data directly from Uber, Didi and other platforms. So they already know roughly what you earned. If your expenses look very high compared to your income, it can trigger a review.

The best way to protect yourself is simple:

• Keep your logbook up to date
• Save all your receipts (digital copies are fine — photos on your phone work)
• Be consistent — use the same method each year
• Work with a tax accountant who understands rideshare

If everything is properly documented, an IRD review is just paperwork. If its not documented, it can get expensive.

Final Thoughts — Don't Leave Money on the Table

Your car is your most valuable business asset as a rideshare driver. It earns you money every day, and it costs you money every day too. The good news is, IRD wants you to claim these costs — it is your legal right as a self-employed person.

The key things to remember are:

• Choose either the kilometre rate method or the actual cost method — both are valid
• Keep a logbook for at least 90 days to establish your business use percentage
• The km rate is simpler; actual costs can be better for newer, expensive cars
• Don't forget smaller deductions like cleaning, tolls and accessories
• Never rely on the 25% default — it almost always costs you money

If you are not sure which method is better for your specific situation, the smartest thing you can do is talk to an accountant who actually knows rideshare tax. A good accountant will pay for themselves many times over in the deductions they help you find.