Private ruling: Work related expenses
Date of advice: 16 February 2018
Published: June 2018
Ruling period: 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to claim all animal consumable products and veterinary expenses for all animals used in your role? | A1: No | Q2: Can you claim expenses incurred for maintaining animals housed 100% of the time and used where you have the required substantiation? | A2: Yes | Q3: Are you entitled to a deduction for expenses you incurred for the maintenance of your animals used? | A3: No | Q4: Are you entitled to deductions where invoices are in the name of another entity? | A4: No | Q5: Are you entitled to deductions where the only substantiation is your bank statements? | A5: No | Q6: Are you entitled to deductions for expenses incurred for injuries and other conditions existing prior to the animal being used? | A6: No

Relevant facts and circumstances: You are employed. This work requires that people have exposure to animals. The animals are required to be fed and maintained to the standards outlined. You have interaction with the animals. These are the prerequisite courses for occupations. Course material is provided which is accredited. The animals used are generally owned, provided by and cared for by you. A substantial number of these competencies required direct observation of and handling of animals, which must be available. The various certificates have specific competencies that require both observation of and interaction with the animals. The certificate competencies cannot be met without direct access to the animals. Currently there are animals kept full time at the school. The animals were not purchased. All animals are either strays that have been donated by third parties or trapped. The residence-based animals were acquired. The animals housed at work are there 365 days per year. The animals located at work are cared for on a rostered basis by you and assistants employed partly for this purpose. You are the only person utilising the animals. You own all the animals. You fund all the animals. You are effectively the sole carer for these animals. Animals are taken to your work. Some animals are based at your residence are cared for by you and your partner as domestic pets. The animals are not guard dogs. They have received basic behaviour training. The other animals are trained. The animals have been given names. The animals are de-sexed at your own cost. You are the designated person, as detailed in procedures. You are the only designated person at your work. The designated person is responsible for the welfare of all the animals on site and makes recommendations about the use of animals as well as approving the use of the animals. This is considered an additional duty and unpaid. You wish to claim costs. Expenses are for animals exclusively on-site. Expenses are for your personal animals where are also used for work purposes. There is a budget per financial year. The budget line item intended to cover management of animal emergencies in your role. It is generally spent. You do not have a letter or supporting evidence from your work to show that the work related expenses will be well over the budget. You submit receipts and are reimbursed for the budget. Receipts for the claims were provided. Majority of all receipts/invoices provided were under the name of a different entity. Further receipts were bank card statements with no visible name or details.

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 or are necessarily incurred in carrying on a business for the purpose of 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, or a provision prevents the deduction. 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, ● 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). To determine whether your expenses are deductible, the essential character of the expenditure must be considered. It is necessary to determine whether there is a sufficient nexus between the expenditure and your current income-earning activities. A deduction is only allowable if an expense: ● is actually incurred, ● meets the deductibility tests, and ● satisfies the substantiation rules. | Detailed Reasoning - Animals Kept Permanently at Workplace: Tax Ruling TR 95/14 paragraph 205 states that the cost of maintaining pets that is used as part of your everyday duties is an allowable deduction. Therefore, the cost of feeding the animals kept 100% and used solely for your work activities are an allowable deduction under section 8-1 of the ITAA 1997. De-sexing costs are not usually regarded as costs of maintaining an animal. From the information provided there is not enough information to show that such costs have the necessary nexus with your income earning activities. Therefore these costs are not an allowable deduction. Similarly where animals require treatment before being used at work, such expenses are incurred at a point too soon to be regarded as an allowable deduction. | Detailed Reasoning - Substantiation: Division 900 of the ITAA 1997 sets out the substantiation rules that apply to work expenses, car expenses and business travel expenses. Where a deductible expense is incurred, written evidence such as an invoice from the supplier should include: ● the name of the supplier, ● the amount of the expense, ● the nature of the goods or services and ● the date the expense was incurred. An electronic copy of an invoice or similar document from the supplier showing the above information is acceptable for substantiation purposes. However a bank statement merely showing various expenses is not sufficient for substantiation purposes. A bank statement showing an amount does not provide the necessary details of the nature of the goods. Therefore where the only substantiation, for an expense is a bank statement, a deduction is not allowed. 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). XXXX is a separate entity from you. Therefore invoices for XXXX are not expenses incurred by you and therefore you are not entitled to a deduction for such expenses. You are the designated person, as detailed the only designated person at your work. The designated person is responsible for the welfare of all the animals on site and makes recommendation about the use of animals as well as approving the use of the animals. This is considered an additional duty and unpaid. As no assessable income is derived from the unpaid position of the designated person, no deductions are allowable in relation to this role. | Detailed Reasoning - Animals Kept at Home: An animal is inherently considered a pet so generally, expenses incurred in maintaining an animal are a private or domestic expense. However, in some limited instances an animal 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. These dogs are reliant to the operation of the business and maintenance expenses, such as food, shampoos and flea treatments, of a guard dog would generally be an allowable deduction as business expenditure under section 8-1 of the ITAA 1997. Taxation Ruling TR 95/13 states a deduction is also allowable for police officers in maintaining, feeding, grooming, exercising and training police dogs (but not privately owned dogs). A deduction is not allowable for expenses which are reimbursed by the employer. In your situation, your animals are your family pets and reside and are cared for by you at home. You are enabled by your employer to have your animal accompany you at work on some days. The animals have received basic behaviour training as opposed to the other animals. Your animals perform 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 animals are not considered to be expenses incurred in gaining your assessable income. Your employer does not provide you with financial support to help pay for the costs of maintaining your animals. The impression gained is that there is not a strong or crucial nexus between the expenses incurred to maintain your animals and the activities of your employment. As such, it is considered that the role your animals play in your work is minor and not sufficient to convert inherently private expenses incurred in maintain them into work-related expenses. Therefore, the expenses for your animals are not deductible under section 8-1 of the ITAA 1997.