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Valuing trading stock

Check what is considered as trading stock and work out if your trading stock's value is increasing.

Last updated 19 June 2019

You are required to undertake a stocktake as close as possible to the end of each income year.

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

Conducting a stocktake usually involves physically counting your stock and valuing each item, using one of three methods:

  • The cost price method includes all costs associated with bringing the stock to its current condition and location. This may include the cost price plus freight, insurance, customs and excise duties, and delivery charges.
  • The market selling value method uses the current value of stock if it is sold in the normal course of business.
  • The replacement value method uses the cost to obtain an almost identical item that is available in the market on the last day of the income year.

You can choose a different method each year for different items of stock.

The closing value for an item of trading stock at the end of one income year automatically becomes its opening value at the beginning of the next income year.

If you are entitled to GST credits you generally exclude the GST component when calculating your trading stock’s value.

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See also:

  • IT 2670 Income tax: meaning of 'trading stock on hand'  

QC44444