Edited version of private advice

Authorisation Number: 1052217548831

Date of advice: 1 February 2024

Ruling

Subject: Deductions - therapy dog

Question

Are you entitled to claim a deduction for all, or a portion, of the expenses related to maintaining your therapy dog under section 8-1 of the Income Tax Assessment Act (ITAA 1997)?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

You are employed by XX primary school.

You have a therapy dog called XX.

XX is a fully certified therapy dog.

You are a certified handler and XX is under your supervision.

You incurred all expenses relating to the therapy dog program.

The dog attends school with you approximately 3 days a week.

Outside of school hours, the dog resides with the you at your home.

XX primary school does not pay for XX to attend school or for XX services.

Your employer does not contribute financially to any of the expenses relating to your dog.

XX roles and responsibilities include:

•         Emotional support

•         Social and behavioural improvement

•         Academic Enhancement

•         Reducing absenteeism

•         Crisis Intervention

To date you have incurred certain costs associated to XX, these include the following;

•         Purchase of dog

•         Consult

•         Assessment cost

•         Clinical therapy dog course and training certification

•         Temperament assessment

•         Equipment and supplies

•         Food and nutrition expenses

•         Veterinary care

•         Pet insurance

•         Medication and supplements.

You have not provided your employment contract as it was unavailable to you.

You have not provided your duty statement.

You have stated it is not a requirement of your employment to have a therapy dog.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Summary

The cost incurred for the purchase of a therapy dog and costs associated to maintaining the dog and its qualifications as a therapy dog cannot be claimed as a deduction under Section 8-1 of the ITAA1997.

This is because expenses incurred for the purchasing, training and maintaining of a therapy dog are not incurred in earning your assessable income.

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, or relate to the earning of exempt income.

To be deductible under section 8-1 of the ITAA 1997, expenditure must have the essential character of an outgoing incurred in gaining assessable 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, and the expenditure must not be capital, private or domestic in nature.

Generally, the costs to maintain and train animals are a private expense and not tax deductible. The preliminary purchase costs of a dog and any associated fees with training are considered in ATO Interpretative Decision (ATO ID) 2011/18 Income tax: Deductions: guard dog expenses. Where a dog's owner is an employee rather than a business, any deduction can only be determined by reference to whether the ongoing maintenance costs have the necessary connection with the employee's salary and wages.

There are limited circumstances in which a deduction for the purchase, training and care of a 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. For example, where the dog is trained as a mustering dog, guard dog, sniffer dog or police dog and it is used in such a capacity, they perform an identifiable function in a business operated by their owner and a deduction for the upkeep would normally be allowable.

Taxation Ruling (TR) 2022/1 Income tax: effective life of depreciating assets (applicable from 1 July 2022) considers all assets that an individual can depreciate in the course of earning assessable income where the nexus between the outgoing and the income can be connected. Working dogs (including certified therapy dogs used by a qualified therapist) are listed as a depreciating asset. However, the definition of a working dog in the TR 2022/1 also outlines that assistance dogs (including support dogs) are excluded and are not considered to be working.

The role of the therapy dog is not assisting you in directly performing your duties and does not have an integral role in your income producing activities. The expenses for the purchase, training and maintenance of the dog have not been incurred in earning your assessable income and are therefore not deductible under section 8-1 of the ITAA 1997.