Private ruling: Work related expenses
Published: July 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for the maintenance expenses of a dog? | A1: No.

Relevant facts and circumstances: You are a business. Due to previous examples of uncooperative customers in regards to paying for goods and services, the business owner acquired a dog. The dog accompanies the business owner and remains on the premises for the entire duration of the business' operating hours. The dog also acts as a mascot with many customers associating the dog with being an integral component of the business' image. You incur expenses of veterinary, food, grooming and hiring competent people to prevent the dog from escaping.

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 or relate to the earning of exempt income. A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997, it must have the essential character of an outgoing incurred in gaining assessable income ( Lunney v. FC of T , Hayley v. FC of T (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166) and there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236). The dog that the business owner purchased is generally considered to be a pet, so the expenses incurred in maintaining it are considered to be a private or domestic expense. However, in some limited circumstances an animal will be considered a working beast or item of plant for a business, for example a working dog used to muster stock, as it is serving a productive function of the business. Usually, these dogs remain on the business premises and do not socialise with owners at all. These dogs are relevant to the operation of the business and maintenance expenses, such as food, shampoos and flea treatments, of a working dog would generally be an allowable deduction as business expenditure under section 8-1 of the ITAA 1997. Taxation Ruling TR 95/13 states that a deduction is also allowable for police officers in maintaining, feeding, grooming, exercising and training police dogs (but not privately owned dogs). In your situation, you are a business and the business owner acquired a dog to act as a guard dog and a mascot. The dog accompanies the business owner and remains on the premises. Although the dog may provide a benefit to your business, it is not sufficient enough to modify the inherently private nature of the expenses into expenses that are incurred in earning your assessable income. Accordingly, you are not entitled to a deduction for any of the expenses related to your dog under section 8-1 of the ITAA 1997 as they are considered to be of a private or domestic nature.