Essentially, your first preference is considered first, i.e prioritised based on the assumption that your first preference would normally be your dream course. If you are not made an offer for your first preference, then your second preference will be considered/prioritised. Similarly, if you are not made an offer for your second preference, then your third preference will be considered/prioritised, and so on. This means that, with respect to the fifth preference, if you are made an offer for your fourth preference (or higher), then you will not be considered in terms of your fifth preference since you have been made an offer for a higher preference (which generally implies a degree with higher importance to you), even if you met the guaranteed ATAR for your fifth preference. Consider the following example:
As you can see, an offer was received to a higher preference (in this case first preference). Consequently, the lower preferences were not considered.
I hope this helps!