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  • Overview of simpler trading stock rules for small businesses

    If you're a small business with an aggregated turnover of less than $10 million a year, and you estimate that the value of your trading stock changed by no more than $5,000 in the year, you don't have to:

    • conduct a formal stocktake
    • account for the changes in your trading stock’s value.

    Your estimate will be considered reasonable if either:

    • you maintain a constant level of stock each year and have a reasonable idea of the value of your stock on hand
    • your stock levels fluctuate but you can make an estimate, based on your records, of the stock you have purchased.

    If the difference in your trading stock’s value during the year varied by more than $5,000, use the general trading stock rules.

    An increase in your trading stock’s value over the year is assessable income, while a decrease is an allowable deduction.

    Examples: Value of trading stock changes

    Joel runs a knitwear store and the value of his opening stock for 2018–19 was recorded as $5,600.

    If Joel made a reasonable estimate that the value of his closing stock at the end of 2018–19 was:

    • $8,000, as the difference is no more than $5,000, he doesn't need to do a stocktake or include the increase in value of his stock in his assessable income
    • $12,000, as the difference between the opening stock ($5,600) and his reasonable estimate of the closing stock ($12,000) is greater than $5,000, Joel must do a stocktake and include the increase in value of his stock in his assessable income for 2018–19.
    End of example

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    Last modified: 20 Jun 2019QC 44443