Private ruling: Work related expenses - working dog
Published: June 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Questions and answers | Are you entitled to a deduction for expenses you incur in relation to dogs you use as part of your employment activities? | Yes. | Are you entitled to a deduction for the decline in value of dogs you use as part of your employment activities? | Yes.

Relevant facts and circumstances: You use a working dog in your work at a meat works. You have incurred food and vet bills for the working dog.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Section 40-25. | Income Tax Assessment Act 1997 Subsection 40-25(7). | Income Tax Assessment Act 1997 Subsection 40-30(1).

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. To be deductible under this section an expense must have the essential character of an expense incurred in gaining or producing assessable income or, in other words, of an income-producing expense. You have asked whether you can claim the cost of food and veterinary fees in relation to the use of your working dog. Taxation Ruling TR 95/18 provides the Commissioner's views on working dogs used for work-related purposes. The ruling explains at paragraph 230 that associated veterinary fees and pet food expenses are allowable deductions. In your case, you can claim a deduction for veterinary fees and pet food expenses as there is sufficient connection with the expenses being incurred in earning your assessable income. | Detailed Reasoning - Apportionment of deductible expenses: In section 8-1 of the ITAA 1997 the words to the extent to which signify that an expense may be apportioned if it is only partly incurred to produce assessable income. In Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47; 4 AITR 236 the High Court stated that the actual apportionment of expenses must be based on the facts of the case and there must be some fair and reasonable assessment of the extent (to which the outlay relates to) assessable income. In your case, you will need to calculate a fair and reasonable assessment of the proportion of veterinary fees and pet food expenses incurred when the working dog was used in the producing of your assessable income. The general requirement when apportioning expenditure is to assign a percentage to represent the deductible part of a composite expenditure. For example your deduction may be based on a time basis i.e. the work items cost multiplied by the working days the Dog was used for income producing purposes divided by total days in the year. For example if a taxpayer used the working dog between 1 December 2004 to 30 June 2005 and the total cost of your veterinary fees was $600 for the 2005 tax year, your total deduction would be calculated as follows: $600 X 212/365 = $349 | Detailed Reasoning - Decline in value: The purchase cost of the working dog relates to a purchase of plant, which is a capital expense, and is not an allowable deduction under section 8-1 of the ITAA 1997 but a decline in value of a depreciating asset deduction is allowable under Division 40 of the ITAA 1997 Division 40 of the ITAA 1997 deals with deductions for the cost of depreciating assets. Section 40-25 of the ITAA 1997 allows a taxpayer to deduct an amount equal to the decline in value of a depreciating asset which is held for any time during an income year and used for a taxable purpose. A taxable purpose includes the purpose of producing assessable income [subsection 40-25(7) of the ITAA 1997]. If equipment is used partly for work related purposes and partly for other purposes, then the depreciation should be apportioned based on an estimate of the percentage of work-related use. You cannot claim a deduction if the equipment is supplied by your employer or any other person. Generally, the amount of your deduction depends on the effective life of the equipment. Subsection 40-30(1) of the ITAA 1997 defines a depreciating asset as an asset which has a limited effective life and can be expected to decline in value over the time it is used. TR 95/18 at paragraph 229 explains that a deduction is allowable for depreciating the cost of a working dog which is used by a truck driver in the course of his or her income-earning activities (for example, a driver who is transporting cattle). A depreciable item bought on or after 1 July 1991 is able to be depreciated at a rate of 100% if its cost is $300 or less, or its effective life is less than three years. In your case your dog was purchased for under $300. The working dog is a depreciating asset for taxation purposes. Therefore, you are entitled to claim a 100% deduction for the decline in value of the working dog purchased for $200.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.