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Edited version of private advice
Authorisation Number: 1051832236657
Date of advice: 30 April 2021
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:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a Manager at a care facility.
You intend to purchase a dog for use as a 'therapy dog' for residents of the facility.
The dog you intend to purchase has been bred to work in aged care homes and/or disability services.
The dog would be staying permanently at the facility during the week and you would take the dog home on Friday afternoons for the weekend and then return the dog on Monday mornings.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Summary
In your circumstances, the expenses you will incur for the purchasing, training and maintaining of a therapy dog will not be incurred in earning your assessable income. Therefore, the expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997(ITAA 1997)or any other section of the Act.
Detailed reasoning
Section 8-1 of the 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, the dog would interact in a passive way with clients and the role of the dog will not be assisting you in directly performing your duties. The dog would not have an integral role in your income producing activities and therefore, there is not a sufficient nexus.
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