Private ruling: Deduction for an animal
Published: June 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to claim a deduction for the purchase, training and ongoing maintenance costs of an animal? | A1: No

Relevant facts and circumstances: You are employed as health professional in two roles. One role is as an employee manager and also as a private practitioner. You plan to get an animal which will be with you at your first job for the major part of the week and then in your private practice for the rest of the week. When not with you at your two jobs, it will be at home with you as a pet. The animal will be involved in a range of individual and group sessions and activities with the aim of normalising people's experience of seeking help.

Relevant legislative provisions: Income Tax Assessment Act 1997 - Section 8-1

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. Various decisions of the courts over the years have determined that there must be a nexus or connection between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431) and the expenditure must not be capital, private or domestic in nature. There are limited circumstances in which a deduction for the purchase, training and upkeep of the animal can be claimed. These involve a finding that the animal performs an integral part of the income producing activity and contributes to the production of that income. Where the animal is trained for particular purposes and it is used in such a capacity, they perform an identifiable function in the business operated by their owner and a deduction for their upkeep would normally be allowable. Where the animal's owner is an employee, any deduction can only be determined by reference to whether the cost of maintaining the animal has the necessary connection with the derivation of the employee's salary or wages. In your case, you are an employee professional and you are a sole trader. The animal's role is normalising people's experience of seeking help. While we accept that there is evidence to support the psychological benefits of animals, the role of the animal will be to assist your clients and not assisting you in directly performing your duties. Although the animal is used in your day to day role, it does not have an integral role in the income producing activities. Rather, it reflects on your personal desire to help your clients. Your employer will not contribute to its maintenance or make the animal a requirement of your employment. The conclusion drawn is that the animal is brought to work by you as a matter of personal choice and takes no productive part in the derivation of your assessable income. Therefore no deductions for the purchase, training and upkeep of the animal are allowable.