ATO Interpretative Decision

ATO ID 2011/18

Income Tax

Deductions: guard dog expenses
FOI status: may be released
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Are the costs incurred in training a guard dog to protect business premises deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?


No. The training costs are not deductible under section 8-1 of the ITAA 1997.


The taxpayer purchased a dog for use solely as a guard dog to protect equipment and supplies at the taxpayer's business premises.

The taxpayer incurred expenses in having the dog complete guard dog training.

Reasons for Decision

A guard dog used to provide security for business premises is considered to be a working beast or plant, as it serves a productive function of the business. Consequently, the guard dog is a capital asset of the business.

Under section 8-1 of the ITAA 1997, expenditure incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of producing assessable income, is deductible if it is not capital or of a capital, private or domestic nature.

The leading authority on the distinction between revenue and capital outgoings is the judgment of Dixon J in Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 23; 1 AITR 403. Dixon J set out three matters to be considered (at CLR 363):

the character of the advantage sought, and in this its lasting qualities may play a part,
the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and
the means adopted to obtain it, that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment.

In applying these factors to the guard dog training expenses, clearly the training is a once-off expense calculated to produce a benefit for the business for the working life of the dog, that is, an enduring benefit. The outgoing is not incurred over the life of the benefit but as a preliminary expense in obtaining the benefit of a guard dog.

Accordingly, the expense is of a capital nature and is not deductible under section 8-1 of the ITAA 1997.

Date of decision:  10 August 2001

Year of income:  Year ended 30 June 2001 Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
   section 8-1

Case References:
Lunney & Anor v Federal Commissioner of Taxation
   (1958) 100 CLR 478
   (1958) 11 ATD 404
   7 ATR 166

Ronpibon Tin NL & Tongkah Compound NL v Federal Commissioner of Taxation
   (1949) 78 CLR 47
   (1949) 8 ATD 431
   4 AITR 236

Sun Newspapers Ltd v Federal Commissioner of Taxation
   (1938) 61 CLR 337
   (1938) 5 ATD 23
   1 AITR 403

Deductions & expenses
Working animals

Siebel/TDMS Reference Number:  1-25K93IT; 1-5SUC4IB; 1-BD46U7J

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  25 February 2011
Date reviewed:  3 May 2017

ISSN: 1445-2782

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