The simplified tax system - a guide for tax agents and small businesses

What is trading stock?

Trading stock includes anything produced, manufactured, acquired or purchased for manufacture, sale or exchange.

This includes livestock (but excludes animals used as beasts of burden or working beasts in a non-primary production business).

Trading stock does not include:

• standing or growing crops, timber or fruit - these only become trading stock when they are harvested, felled or picked
• stocks of spare parts held for repairs or maintenance to plant and equipment
• video cassettes owned by a video lending business where they are used to earn income by hire or rental, rather than manufacture, sale or exchange, or
• consumable and business inputs to manufacture, such as cleaning agents or sandpaper.

Generally a stocktake is necessary to work out the value of trading stock at the end of the income year. This involves working out the physical quantities of stock on hand and assigning a value to each item of stock. Each item of stock is valued at either cost, market selling value or replacement price.

Sections within What is trading stock?

• Valuing trading stock