With work‑from‑home (WFH) expenses front of mind this tax season, it’s time to get serious about your Item D5 claim. If you’re an employee, here’s exactly what you need to know—and how that differs from a sole trader running a business from home.
What Is Item D5?
Item D5 on your individual tax return is where you claim your WFH running expenses—think electricity, office supplies, phone and internet, depreciation of equipment, etc. The ATO lets employees choose between two methods:
1. Fixed‑rate method ($0.70/hour for 2024–25) – covers all running expenses except phone and internet.
You can claim a fixed rate for each hour you work from home during the relevant income year. The rate includes the additional running expenses you incur for:
- home and mobile internet or data expenses
- mobile and home phone usage expenses
- electricity and gas (energy expenses) for heating, cooling and lighting
- stationery and computer consumables, such as printer ink and paper.
The rate per work hour includes the total deductible expenses for the above additional running expenses. If you’re using this method, you can’t claim an additional separate deduction for these expenses.
Claiming Expenses the fixed rate does NOT include
Items such as technology and office furniture can be claimed separately. This includes laptops, keyboards, office chairs etc.
- Items over $300 must be depreciated
- Items must be apportioned for business use.
- Items under $300 can be fully deducted for their business use portion.
2. Actual‑cost method – you add up the true cost of each expense and apportion to WFH use.
Substantiation Rules for Employees
No receipts, no claim. The ATO demands:
- Work‑from‑home diary – at least 4 consecutive weeks of detailed hours (date, start/end time, tasks).
- Receipts/invoices – keep all bills for supplies, utility costs, equipment.
- Evidence of employment requirement – e.g. your employment contract, a letter from your employer confirming you worked from home.
If you use the fixed‑rate method, you still need your diary. If you go actual‑cost, you also need records showing how you apportioned each bill to WFH use.
3. How Sole Traders Claim WFH
Sole traders can use the same method but we include the claim for WFH as part of your business expenses on your Schedule C, using either:
- Home‑office deduction at a fixed rate of 70c per hour or a percentage of home costs (electricity, rent/mortgage interest, insurance).
- Actual‑cost apportionment – split your total household bills by % of floor space and business hours.
Your records must include:
- Diaries or appointment books showing business use of home office.
- Full receipts for all household and office expenses.
- Floor‑plan calculations (home office square metres ÷ total home square metres).
4. Quick Tips for Bullet‑proof Records
- Keep your WFH diary up to date as you go—don’t leave it to June.
- Scan or photograph receipts immediately and store them in a dedicated folder.
- Label every utility bill with the % you’re claiming.
- Review your diary monthly to catch any missing entries.
5. Download Our WFH Diary Template
Make substantiation easy—click here to download our free WFH Diary Template.
Need More Help?
If you’re unsure which method suits you or need help setting up your records, get in touch. We’ll help you maximise your claim—legally and stress‑free.