Private ruling: Guard dog expenses
Published: April 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the expenses relating to the maintenance of guard dogs? | A1: Yes

Relevant facts and circumstances: You run a business. The business premises have no security installed. You maintain two dogs to prevent theft and damage to assets held on business premises. The dogs are kept at the business premises at all times.

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 where a deduction for the upkeep of a dog can be claimed. These involve a finding that the dog performs an integral part of the income producing activity and contributes to the production of that income. In your case you use the dogs, which are kept at the business premises at all times, as guard dogs to prevent theft and damage to trucks in the truck yard. This can be viewed as an identifiable function of the business operated and therefore contributes to the production of assessable income. You are entitled to a deduction for the maintenance of the guard dogs under section 8-1 of the ITAA 1997.