Why the ATO Emailed 500,000 Australians About Car Claims
If you’ve claimed car expenses on a tax return in recent years, don’t be surprised if you’ve had an email from the ATO with the subject line “Are your car expenses work-related?” You’re not alone. More than half a million Australians have received the same message this tax season.
It isn’t a scam, and it isn’t random. It’s a deliberate, targeted warning, and it’s worth understanding exactly why the Tax Office is sending it, and what it means for your next return.
Why the ATO Is Focused on Car Expenses
Car expenses are Australia’s largest work-related deduction category, with close to $12 billion claimed last financial year. ATO Assistant Commissioner Anita Challen says the Tax Office is now watching these claims “more closely than ever,” particularly where they look excessive or incorrect. Data-matching already led to adjustments on more than 595,000 individual returns last year.
Two patterns are drawing the most attention:
Claiming the daily commute:
- Travel between home and your regular workplace is generally private travel, not work-related, no matter the distance, unless you meet one of the few exceptions.
Always claiming the maximum kilometres:
- The cents-per-kilometre method caps at 5,000km per car, and the ATO has flagged taxpayers who claim that exact figure every year regardless of actual travel.
A Refresher on the Two Claim Methods
Cents per kilometre method
A flat rate for every business kilometre, up to 5,000km per car. For 2025–26 it’s 88 cents/km (max claim $4,400), rising to 91 cents/km ($4,550 max) from 1 July 2026. It’s all-inclusive, so fuel, insurance and servicing can’t be claimed separately on top.
Logbook method
Claims the actual work-related percentage of your running costs, based on a logbook kept for a continuous 12-week period. It suits higher-mileage drivers and can produce a larger deduction but requires proper records and odometer readings. Make sure to show the detailed purpose of your journey and not simply write ‘Business trip’. For example, a suitable description could be ‘Meeting with client’.
Do you drive a Ute?
If you drive a ute or similar vehicle with a carrying capacity of more than one tonne, it is not considered to be a Car and you are required to keep ALL receipts including every fuel receipt. Bank statements are not an acceptable record of the expenses. You cannot use the cents per kilometre method to calculate your deduction. A logbook is recommended to ensure you are claiming the appropriate amount for work related use.
Overclaimed in the Past?
If you think a previous return overstated your car expenses, lodge an amendment or talk to us about correcting it. Fixing it voluntarily is treated very differently to being caught out later.
Quick Tips Before You Lodge
- Wait until late July, once pre-fill data (wages, interest, health insurance) is complete
- Keep evidence of your work trips, even under the cents per kilometre method
- Keep receipts for fuel, servicing, insurance, registration and vehicle purchase costs for the logbook method
- Only claim genuine work travel, not the commute
- Don’t default to the maximum kilometre cap if it’s not accurate
Talk to Us Before You Lodge
Car claims are an easy area to get wrong, and now one the ATO is watching closely. A quick check-in with our team can help make sure your claim is accurate and defensible.
Get in touch with our office today if you’d like help reviewing your car expense claims before you lodge.
Stuart Arthur
Client Manager
Mark Herron
Principal