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Edited version of your private ruling
Authorisation Number: 1012520215027
Ruling
Subject: Work related expenses
Question
Are you entitled to a deduction for expenses related to a guard dog?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You are an employee.
You keep a work vehicle at your premises overnight and on weekends.
You have acquired guard dogs to assure the safety of the vehicle overnight and on weekends.
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.
A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997, it must have the essential character of an outgoing incurred in gaining assessable income (Lunney v. FC of T, Hayley v. FC of T (1958) 100 CLR 478; (1958) 11 ATD 404; (1958) 7 AITR 166) and 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 NL v. FC of T (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236).
A dog is ordinarily considered a pet and therefore expenses incurred in relation to a dog are generally not deductible as they are private or domestic in nature.
However, in some limited circumstances an animal will be considered a working beast or item of plant for a business, for example a working dog used to muster stock, as it is serving a productive function of the business. Usually, these 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 working dog would generally be an allowable deduction as business expenditure under section 8-1 of the ITAA 1997.
In your case the dogs are guarding your vehicle and equipment at your premises overnight and on weekends. While they are on your property, the dogs are also protecting your house and personal assets.
On balance, we consider that the costs incurred in relation to your dogs are essentially private in nature. Therefore, you are not entitled to a deduction under section 8-1 of the ITAA 1997.