Edited version of private ruling

Authorisation Number: 1011587371883

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Ruling

Question

Are you entitled to a deduction for expenses you incurred for the maintenance of your dog used as an education tool?

No.

This ruling applies for the following periods

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on

1 July 2008

Relevant facts and circumstances

You are employed as an education officer.

It is not a condition of your employment that you provide your own dog to work with.

An option provided by your employer enables you to have your dog accompany you at work daily.

Your employer offers an extensive education programme with hands-on learning for students, and your family pet is used as an education dog as part of the program.

Your dog is used to assist you with educating students about the subjects you teach, and on a daily basis, he attends presentations held at the centre and offsite educational institutions.

By having your dog with you, you are able to engage students in conversation and use him to demonstrate techniques in animal care and handling.

If your dog was unavailable, you would take a rabbit or rat from the centre to use in your presentations to the students.

You do not receive any allowances or reimbursement from your employer for the cost of maintaining your dog.

You have not received an increase in pay because of the use of your own dog.

You have the required substantiation for all the expenses incurred in relation to the maintenance of your dog.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

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.

In order to be deductible under section 8-1 of the ITAA 1997, expenditure must have the essential character of an outgoing incurred in gaining assessable income (Lunney v. Federal Commissioner of Taxation (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 ATR 166). 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 N.L.Tongkah Compound N.L. 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 inherently considered a pet so generally, expenses incurred in maintaining a dog are 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. These dogs are relevant 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.

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 dog resides and is cared for at home. An option provided by your employer enables you to have your dog accompany you at work daily. He provides social interaction with the people he comes in contact with, and is used to engage students into conversation as well as being used to demonstrate certain techniques in animal care and handling.

He 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 maintaining your dog are not considered to be expenses incurred in gaining your assessable income. It is not a requirement of your employer that you have a dog to be able to carry out your duties and having the dog assist you has not led to an increase of your income, either by way of an increased salary or wage or by way of an allowance.

In addition your employer does not provide you with financial support to help pay for the costs of maintaining your dog. The impression gained is that there is not a strong or crucial nexus between the expenses incurred to maintain your dog and the activities of your employment.

As such, it is considered that the role your dog plays in your work as an education dog is minor and not sufficient to convert inherently private expenses incurred in maintaining your dog into work- related expenses. Therefore, these expenses are not deductible under section 8-1 of the ITAA 1997.

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