Breeding dogs, cats, or other pedigreed animals and selling the offspring has grown from a niche hobby into a proper small business for many enthusiasts, with puppies and kittens of popular breeds commanding significant prices. Once this moves beyond an occasional litter from a family pet into a regular activity, the income from selling animals becomes taxable business income, with its own set of deductible costs.
Running a pet breeding operation involves ongoing costs: feed and nutritional supplements for the breeding animals and their offspring, veterinary care including vaccinations, health checks, and any breeding-related procedures, registration fees with kennel clubs or breed registries for pedigreed animals, costs of maintaining the breeding facility (kennels, enclosures, cleaning supplies), and stud fees paid to use another breeder's animal for breeding. All of these are generally deductible against sale proceeds in arriving at taxable business profit.
The breeding animals (the parent dogs or cats retained for ongoing breeding, as opposed to the offspring sold) function more like capital assets of the business, generating the saleable offspring over multiple breeding cycles, rather than being stock-in-trade themselves (since they are not the items being sold). The cost of acquiring such breeding animals, and any depreciation-like treatment, would be relevant primarily if and when such an animal is itself eventually sold or the breeding operation winds down, a different question from the income earned from selling each litter's offspring.
Where a family pet has a single, unplanned or occasional litter and the owner sells a few puppies as a one-off, without this being part of a regular, ongoing breeding operation, this is a different scenario from a deliberate breeding business. Such occasional, incidental receipts might be viewed differently (potentially as a casual receipt rather than business income), though the line between 'occasional' and 'regular, with intention to generate income' is the key distinguishing factor, and repeated litters sold over successive years would tend to indicate the latter.
Selling live animals has its own specific GST treatment (which can differ from the treatment of pet food, accessories, or veterinary services), and pet breeding operations, depending on scale and location, may also be subject to local body licensing or animal welfare regulations, compliance dimensions distinct from, but worth being aware of alongside, the income tax treatment discussed here.