Private ruling: Dog expenses
Published: February 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for the expenses incurred in purchasing and maintaining your dog? | A1: No. | Q2: Are you entitled to a deduction for the decline in value of your dog? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Section 40-25.

Reasons for decision: Detailed Reasoning - Allowable deductions: Section 8-1 of the 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 be an allowable deduction: • it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; (1958) 100 CLR 478 ( Lunney's case )), • 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), and • it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). A dog is inherently considered a pet and therefore, expenses incurred in maintaining a dog are generally a private or domestic expense. However, in some instances a dog is considered a working beast or item of plant for a business, for example a guard dog used to provide security for business premises, as it is serving a productive function of the business. A working dog used to muster stock is also serving a productive function. Usually the guard and working dogs remain on the business premises and do not socialise with owners at all. The associated expenses are relevant to the operation of the business and are generally deductible. Similarly, a deduction is allowable for police officers in maintaining, feeding, grooming, exercising and training police dogs (but not privately owned dogs). In your case you take your dog to work each day to demonstrate products. The dog lives with you and is cared for at home. While at work, the dog merely performs a passive role as opposed to the example of the guard dog, working dog and police dog where they actively perform substantial tasks relevant to the earning of assessable income. The expenses you incur for your dog are not considered to be expenses incurred in gaining your assessable income as an employee. It is not a requirement of your employer that you have a dog to bring to work. Although encouraged, there is not a sufficient connection between the expenses incurred to purchase, train and maintain your dog and the activities of your employment. It is considered that the role your dog plays in your work is minor and not sufficient to convert inherently private expenses incurred for your dog into work related expenses. Therefore, these expenses are not deductible under section 8-1 of the ITAA 1997. Furthermore, as a general rule, a loss or outgoing will not be deductible unless it is incurred in gaining or producing the assessable income of the taxpayer who incurs it ( Federal Commissioner of Taxation v Munro (1926) 38 CLR 153). In walking your dog and distributing pamphlets for your employer outside of your work hours, this helps promote your employer's business and relates to the income of the business rather than your assessable income. Therefore no deduction is allowed. | Detailed Reasoning - Decline in value: Section 40-25 of the ITAA 1997 allows you to deduct from your assessable income an amount equal to the decline in value of a depreciating asset to the extent that it is used to produce assessable income. As outlined above, your dog is not utilised to produce your assessable income, therefore a deduction for the decline in value of your dog is not allowable.

You bring your dog to work each day to demonstrate products to customers. | You are not required to bring your dog to work, however your employer encourages you to do so. | You spend eight hours per week walking your dog around to promote the employer's business and handing out pamphlets. This is done outside your work hours. | You incurred costs for dog training, vet bills and grooming products during the year.