Edited version of private advice

Authorisation Number: 1051709955929

Date of advice: 06 July 2020

Ruling

Subject: Deductions for a therapy dog

Question

Are you entitled to claim a deduction for the expenses relating to the purchase, training and maintenance of a therapy dog?

Answer

No

This ruling applies for the following period:

Period ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a counsellor who works with clients with trauma.

You want to purchase and train a therapy dog which would be present for the sessions with your clients.

You consider that the dog would be an integral part of your business. The dog would play an active role in the session by providing emotional support to the client and sensory input. For children, it would be active in the sessions with their engagement in play therapy with the dog and for an adult it would provide therapeutic input from being on the client's lap and provided focus through sensory input of patting.

Counsellors offering this therapy are more likely to have long term clients and can help grow the business.

You estimate the cost would be $X for the dog and $Y for training, upkeep and pet insurance.

You have a home office so the dog would be living with you and would be walked out to the office for each session.

Relevant legislative provisions

Income Tax Assessment Act 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.

Various decisions of the courts have determined that in order to show that the outgoing is incidental and relevant to the gaining of assessable income and the expenditure is not capital, private or domestic in nature, there must be a nexus or connection between the outgoing and the assessable income.

There are limited circumstances in which a deduction for the purchase, training and care of the dog can be claimed. These involve a finding that the dog performs an integral part of the income producing activity and contributes to the production of that income. Where the dog is trained as a cattle dog, guard dog, sniffer dog or police dog and it is used in such a capacity, they perform an identifiable function in the business operated by their owner and a deduction for their upkeep would normally be allowable.

While it can be accepted that there is evidence to support the psychological benefits of dogs, in your case, you will take your dog to work where it would interact in a passive way with clients and the role of the dog will not be assisting you in directly performing your duties. Although the dog would be used in your day to day role, it does not have an integral role in the income producing activities.

Conclusion

In your circumstances, are expenses incurred for the purchasing, training and maintaining of a therapy dog are not incurred in earning your assessable income. Therefore, the expenses are not deductible under section 8-1 of the ITAA 1997 or any other section of the Act.

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