Private ruling: Guard dog expesnes
Date of advice: 12 September 2017
Published: January 2018
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for a portion of the running costs incurred in relation to a guard dog used in your home based business? | A1: No


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. 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 & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236), and the expenditure must not be capital, private or domestic in nature. A dog is ordinarily considered a pet and therefore expenses incurred in relation to a dog are generally not deductible as they are private or domestic in nature and not sufficiently connected to the earning of assessable income. 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 that remains on site at all times and a working dog used to muster stock. An animal does not qualify as plant unless it is used in a business ( Case M59 , 80 ATC 409 and Case M72 , 80 ATC 497). In your case, the dog lives at your residence and its presence is used to act as a guard dog. It protects stock which is kept in a shed and a spare room of your home. It is also companionship for another dog. In your case, your dog is not considered to be a working beast or an item of plant for your business. The fact that you have stock kept at your residence does not change the fact that your dog is kept at your residence and is regarded as a pet and a private expense. Whilst it is acknowledged that your dog may protect your stock, it also protects your residence and personal belongings. Your dog is a privately owned dog and the connection between your dog expenses and your business income is too remote. While it is appreciated that the dog performs some guard functions, on balance, we consider that the costs incurred in relation to your dog are essentially private in nature. The dog lives at your private home, and serves to protect not only your trading stock, but your private home, contents and family members. The cost of installing security or maintaining a guard dog at a private residence is essentially private in nature and no deduction is allowable. Accordingly, you cannot claim a deduction for the running expenses incurred in relation to your dog.

Relevant facts: You bought a dog for the purposes of security and as companionship for your other dog. He weighs almost 50kg and is a livestock guardian breed and is bred to alert the family to danger and to protect his territory. | Your home based business includes a large amount of stock which is kept in a shed and a spare room of your private home. | Your backyard adjoins several different neighbours as well as the street. | You also work at a day job and there is no-one home at the property several days a week.