Edited version of your private ruling

Authorisation Number: 1012607885750

Ruling

Subject: Dog expenses

Question

Are you entitled to claim a deduction for the purchase and training of a dog used for Canine Assisted Therapy in private practice and as a work related expense?

Answer

No

This ruling applies for the following periods

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on

1 July 2013

Relevant facts and circumstances

You are employed as a counsellor.

You also run your own private practice. Activities undertaken in your business are of similar nature to your employment.

You purchased a dog to be used to meet and greet clients, escort them to the waiting room and to provide comfort, cheer, relax and de-stress clients.

Clients would be able to pat the dog while they talk to you, or choose to talk to the dog. The dog would provide the physical comfort that a counsellor cannot provide.

You intend to use the dog in a therapeutic manner both in your employment and at your private practice.

At the end of your employment duties the dog returns home with you.

Your employer does not contribute to the maintenance of the dog.

The dog is not a requirement of your employment conditions.

You and the dog have enrolled in a range of courses.

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.

Various decisions of the courts over the years have determined that there must be a nexus or connection between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431) and the expenditure must not be capital, private or domestic in nature.

There are limited circumstances in which a deduction for the purchase, training and upkeep 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, sheep 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.

In your case, your business the dog's role in the business is to provide emotional support and greet clients. Although the dog is used in the day to day services of the business, it does not have an integral role in the income producing activities.

Therefore no deductions the purchase, training and upkeep of the dog can be claimed are allowable under section 8-1 ITAA 1997 for your business income.

Where the dog's owner is an employee, any deduction allowable can only be determined by reference to whether the cost of maintaining the dog has the necessary connection with the derivation of the employee's salary or wages.

In your case, you take your dog to work where it interacts in a passive way with clients. The dog returns home with you on the completion of your duties each day.

Your employer does not contribute to its maintenance or make the dog a requirement of your employment. The conclusion drawn is that the dog is brought to work by you as a matter of personal choice and takes no productive part in the derivation of your assessable income.

Therefore no deductions the purchase, training and upkeep of the dog can be claimed are allowable under section 8-1 ITAA 1997 to your employment income.