The ATO has sent warning letters to over 500,000 taxpayers, who have previously claimed car expenses in their tax return, as part of its crackdown on tax deduction claims.
“Every year, the ATO looks at areas that taxpayers commonly make mistakes,” ATO assistant commissioner Anita Challen said.
“We are watching car expense claims more closely than ever and have a strong focus where we think taxpayers might be making incorrect or excessive claims.
“This includes claiming home-to-work and back travel (which is generally treated as private travel) or common patterns like claiming the maximum 5000 kilometres.”
Car expenses make up the largest work related tax deduction claimed annually, with almost $12 billion claimed in the last financial year.
The most common tracking method is the cents-per-kilometre method, which applies a fixed rate for up to 5000 km of work-related travel, with the rate set at 88 cents per kilometre in the 2025-26 financial year.
This method includes expenses like decline in value, registration and insurance, maintenance, repairs and fuel costs. This can’t be claimed separately in the tax return.
The other is the logbook method, which allows you to claim the work-related portion of your car expenses.
Challen added that taxpayers should pay attention to their car expenses and making sure they only claim what they are entitled to and have the records to prove their claims.
While taxpayers don’t need receipts for the expenses, they will need to maintain a record showing how the work-related kilometres were calculated.
“Taxpayers who think they’ve overclaimed work-related expenses in previous years need to lodge an amendment or speak to their tax professional and ask them to amend their prior year claims,” Challen said.
The ATO assistant commissioner also urged Australians to wait for the information to be pre filled before submitting a claim this financial year.
“While the ATO welcomes taxpayers’ enthusiasm at the start of tax time, the numbers don’t lie – lodging too early creates more work for taxpayers,” she said.
“Many taxpayers assume getting in first means getting a faster refund, but that is not always the case. Early lodgement increases the likelihood of missing information and mistakes being made, which can delay processing and require amendments.”
They advised taxpayers to not rush, keep a good record, and make sure to include all income, especially if you have multiple jobs, investments, or additional income.
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