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Edited version of your written advice
Authorisation Number: 1012906592743
Date of advice: 11 November 2015
Ruling
Subject: Expenses for a Guard Dog
Question
Are you entitled to a deduction for the costs incurred in relation to your dog?
Answer
No
This ruling applies for the following period
Year ended 30 June 2015
The scheme commenced on
1 July 2014
Relevant facts
You store your work equipment at your residence when not in use. There is also another business that also stores their work equipment at the residence when not in use.
At your residence there is a large garage that you use to house a trailer with your work equipment when not in use. The other business has a work vehicle and builders equipment, also housed there when not in use. You also have a small private vehicle garaged there.
You were concerned for the amount of assets that were being stored in the family garage and wanted to increase security. You purchased a dog to be a guard dog.
You have a dog that at all times lives at your residence. The dog was purchase as a guard dog and the breed of dog is also for this purpose.
You are the registered owner of the dog and have paid all expense involved with the dog.
You consider the dog's guard duties would equally cover both your and the other business's equipment.
You socialise the dog as a family pet for one day a week.
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.
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 & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236), and the expenditure must not be capital, private or domestic in nature.
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 and not sufficiently connected to the earning of assessable income. However, in some instances a dog is considered a working beast or item of plant for a business, for example, a guard dog used to provide security for business premises that remains on site at all times and a working dog used to muster stock. An animal does not qualify as plant unless it is used in a business (Case M59, 80 ATC 409 and Case M72, 80 ATC 497).
In your case, the dog lives at your residence at all times and its presence is used to act as a guard dog. It protects equipment that is not in use and stored in your garage. It is socialised as a family pet.
On balance, we consider that the costs incurred in relation to your dog are essentially private in nature.
Accordingly, you cannot claim a deduction for the food, medical and other expenses incurred in relation to your dog.