Edited version of your written advice

Authorisation Number: 1012885032059

Date of advice: 28 September 2015

Ruling

Subject: Security costs

Question 1

Are expenses incurred in maintaining a guard dog to protect you and your home deductible?

Answer

No.

Question 2

Are expenses incurred in maintaining a security system to protect you and your home deductible?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2015

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

You are a public servant.

You are based at a workplace which has been targeted by persons accused of illegal activities.

The state service is at a heightened threat level.

You have been briefed to be vigilant.

You incur the ongoing costs of maintaining a guard dog and a monitored security system in your home.

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.

However, no deduction is allowed for a loss or outgoing which is of a capital, private or domestic nature or incurred in gaining or producing exempt income.

In Case T20, 86 ATC 211; 29 CTBR (NS) Case 23, the Board noted that the expenditure on improved security measures (radio-controlled garage door, steel security screen doors and deadlocks) incurred by a Family Court judge on his home on the advice of the Intelligence Service, was properly characterised as both capital and private in nature. While it was a 'once and for all' expense, its purpose was protecting the occupants of the premises - the judge's family. PM Roach (Member) also noted (at 213; 162) that the private character of the expense was retained even where part of the property was used for a substantial proportion of the income producing activities of the taxpayer.

In Case V144, 88 ATC 906; (1988) 19 ATR 3880, the taxpayer, another Family Court judge, installed a security system at his home and bought a guard dog on advice from the Attorney-General's Department, following the murder of two Family Court judges and threats against others. He claimed deductions for the costs involved in maintaining and operating the security system; the costs of feeding and maintaining the dog; and the costs of providing heating, lighting and refreshments for public servants standing guard. The expenses were held to be of a private nature and not deductible. Claims for depreciation in respect of the security system and the guard dog were also disallowed.

In contrast, the New Zealand Taxation Review Authority has allowed deductions for the costs incurred by a building contractor in maintaining two dogs used to guard his equipment and materials at contract sites in Case L64 (1989) 11 NZTC 1,374. The dogs were also used to carry small tools in confined areas and to keep other animals from walking over wet concrete. The Authority said that there was a sufficient link between the expenditure on the guard dogs and the taxpayer's business activities as a building contractor.

Taxation Ruling TR 2003/16 provides the Commissioner's view on the deductibility of expenses incurred in protecting yourself from the risk of illness or injury in the course of carrying out your income earning activities. In TR 2003/16, however, the term 'protective items' refers to items of clothing that, according to their design, properties and practical application protect you against illness or injury.

Taxation Ruling TR 95/13 deals with the assessability of allowances and reimbursements received by public servants and deductions for work-related expenses generally claimed by public servants. TR 95/13 states that a deduction is not allowable for expenses incurred in maintaining guard dogs and security systems for the protection of public servants and their families as the expenditure is private in nature.

In your case you own a dog for the purpose of protecting you and your home. You also maintain a monitored security system in your home. Even though you have been briefed to be diligent as a result of your duties as a public servant and your connection with the workplace with its associated heightened threat level, the dog and the security system are not used by you in the performance of your duties as a public servant. Instead, the dog and the security system are used specifically in your home as personal protection for you and your home.

The expenses incurred in maintaining the dog and the security system to protect you and your home are private in nature and not deductible under section 8-1 of the ITAA 1997.