Can you claim commuting costs on tax in New Zealand?

Home to work is private travel

Inland Revenue's position is plain: as a rule, the courts have treated travel between home and work as private. Getting to work is what you do before the working day starts, so the cost is yours, whether you drive, catch the train or pay for parking.

The second rule matters as much. Under the Income Tax Act, an employee cannot deduct expenses incurred in earning employment income. That covers commuting, but also tools you buy yourself, a home office and professional memberships. If you earn only salary, wages or investment income, the expenses you can claim are a short list, such as tax agent fees and income protection insurance premiums. There is no tax return where an employee adds up a year of fuel and gets some of it back.

The exceptions: when the employer carries the cost

The exceptions run through your employer, not your own tax. The main ones:

• Travel for work. Driving from the office to a client, a site visit or a conference is work travel, not commuting. Your employer can reimburse it tax-free, and the Inland Revenue kilometre rates are an accepted way to set the amount.
• A travel allowance for home to work, in listed cases. It is tax-free only when the travel is out of the ordinary: outside normal hours, carrying tools or equipment, a temporary move to another workplace, a condition of the job, or no adequate public transport. Even then, the tax-free part is usually the actual cost less what your usual commute would cost; where there is no adequate public transport, a different rule applies.
• Subsidised public transport. Since 1 April 2023, a bus, train, ferry or cable car fare your employer subsidises for travel between home and work is not a fringe benefit, so neither you nor your employer pays tax on it. That covers fares the employer pays for, such as a pass bought for you or a scheme like Auckland Transport's Fareshare; a cash fare allowance or a refund of your fares is taxed as pay. Bikes, e-bikes and scooters an employer provides for commuting are exempt too.
• Costs of working from home. On the days you work at home, your employer can reimburse the extra costs, such as power and internet, tax-free, as long as the amount is a reasonable estimate of what they cost you.

Vehicle allowances and how they are taxed

A flat car or vehicle allowance is taxed like salary, except for any part that is a reasonable estimate of what you spend on work travel. Your employer can reimburse the actual cost of work travel without tax, but anything paid above that cost is taxable, so an allowance that mostly covers owning the car and commuting ends up taxed through PAYE with the rest of your pay. In the 33% band, after ACC and KiwiSaver at 3.5%, you keep about 62 cents of each dollar (the KiwiSaver part still goes to your savings).

A company car works the other way round. Your employer pays fringe benefit tax on every day the car is available for your private use, and the commute counts as private use. You pay no tax on it yourself. Our article on company cars against car allowances compares the two.

Contractors and the mileage rate

If you are self-employed or a contractor, you can claim the business share of your vehicle costs, either from actual costs with records or using Inland Revenue's kilometre rates for business travel. For the 2025-2026 income year, a petrol car's rate is $1.20 a kilometre (Tier 1) for the business share of the first 14,000 kilometres it travels in the year, and 37 cents (Tier 2) beyond that. The rates for 2026-2027 are due after the tax year ends.

The private rule still applies, though. Travel from home to a regular workplace, such as a client's office where you work every day, is generally private for a contractor too. Travel between clients, or from a genuine business base to a job, can be business travel. Where the line falls depends on the facts, so keep a logbook and check with an accountant.

Getting the allowance into the offer instead

Since you cannot claim the commute yourself, the time to deal with it is when you negotiate. When you receive an offer, or at a pay review, ask whether your employer will:

• pay for a public transport pass directly, which is tax-free to you (a cash fare allowance is not);
• provide a parking space rather than a cash parking allowance, which is taxed; a space at work is worth its full cost to you in a city centre;
• reimburse work travel at the kilometre rate, rather than folding it into a taxed allowance;
• agree hybrid days that cut the number of trips.

A $1,500 fare subsidy your employer pays directly is worth more to you than a $1,500 pay rise, because the rise is taxed first. Our article on salary against the total package shows how to value each part. To know what you are asking for, work out what your commute costs a year: the Commute Cost tool does it by car or public transport, with parking and your time, and needs no account.

Take the commute into your next pay review