Edited version of your written advice

Authorisation Number: 1013104459317

Date of advice: 17 October 2016

Ruling

Subject: Deductions associated with maintenance of an animal

Question 1

Can you claim a deduction for a portion of the expenses associated with maintenance of an animal?

Answer

Yes

Question 2

Can you claim a deduction for the costs of training an animal used in your business?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

01 July 20XX

Relevant facts and circumstances

You operate a business.

You use an animal in the business for a set number of days per week.

The animal is housed at your residence on the other days.

The animal has been trained for its role in your business.

Relevant legislative provisions

Income Tax Assessment Act 1997(ITAA) Section 8-1

Reasons for decision

Summary

The Commissioner is satisfied that the use of the animal has the necessary connection with derivation of your assessable income. Costs associated with training the animal are deductible expenses. Maintenance expenses should be apportioned to reflect the business activity related and private related usage of the animal.

Detailed reasoning

Section 8-1 of the ITAA 1997 provides that in order for an expense to be deductible there must be a connection between the expense and the gaining or producing of assessable income. In addition, the expense must not be of a private or domestic nature.

Generally, costs associated with maintaining and training animals are private in nature and not deductible. However, where a taxpayer uses the animal as an integral part of earning their assessable income, for example a working dog on a sheep farm, deductions will be allowed for these expenses. Where the animal is used for both private and income earning activities, the maintenance expenses should be apportioned using a reasonable basis.

In your case, you use a specially trained animal in your business. You advertise the benefits and advantages of the use of the animal. Your clients are able to book appointments which include the animal. Therefore, you are entitled to claim the portion of maintenance expenses associated with the business function provided by the animal pursuant to section 8-1 of the ITAA 1997.

Apportionment of deductible expenses

In your case, you will need to calculate a fair and reasonable assessment of the proportion of maintenance expenses incurred when the animal is used in the producing of your assessable income.

The animal is used to earn income-producing for several days per week and while it is accepted that you chose the particular type because of its suitability, the Commissioner considers that on the days the animal is not being used in that role it is essentially a pet. For those days, its' use is private in nature.

The general requirement when apportioning expenditure is to assign a percentage to represent the deductible part of the expenditure. You will need to apportion the maintenance expenses between the business function provided by the animal and the private function provided by the animal.

The costs associated with training the animal are deductible expenses and can be claimed in full as they directly relate to the animals role.

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