If your business buys or sells stock, you usually need to do a stocktake to value your stock at the end of each income year. This is because the increase (or decrease) in the value of stock on hand is taken into account in determining your profit or loss for the year.
You need to do a stocktake if:
- your business turnover is greater than $2million, or
- the difference between your stock level at the beginning and end of year is more than $5,000 (you can make a reasonable estimate to determine this).
If a stocktake is required, you should do your stocktake as close to the end of the financial year as practical. Your stock should normally be valued at the lesser of its:
- cost (what you paid for it), or
- net realisable value (what you could sell it for).
If you do a stocktake, your records should include:
- a list describing each article of stock on hand and its value
- who did the stocktake
- how and when it was done
- who valued the stock and the basis of the valuation.
When you start a business, you may be entitled to GST credits and an income tax deduction for any goods you already own and bring into your new business as trading stock. This means you need records of the market value or cost of these goods at the time your business starts.
If your business buys or sells stock, you may need to do a stocktake to value your stock at the end of each income year. If a stocktake is required, you should do it as close to the end of the financial year as practical.