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  • Stocktakes and assets

    Business assets might include buildings, fixtures and fittings, plant and equipment, cars and trucks, office equipment, computers, the stock you sell and many other things.

    You can claim a deduction for most expenses you incur on buying, maintaining, repairing and selling business assets or stock, either immediately or over time. You need to keep records of these expenses to claim the deductions.

    Stocktakes

    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 if:

    • your business turnover is $10 million or more
    • your business turnover is less than $10 million and 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 and keep the following records:

    • 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.

    See also:

    Records of depreciating assets

    If you claim deductions for the decline in value of your depreciating assets, you must keep:

    • the original purchase agreements or invoices
    • records of any expenditure to improve the assets
    • information you used to work out your claim, such as the amount of any private use of the assets.

    Many commercially available software packages contain modules for asset records and depreciation calculations.

    See also:

    Records of assets for CGT purposes

    You may make a capital gain or loss when you sell business assets (other than stock).

    Your business itself is not an asset for capital gains tax (CGT) purposes, but each of your business assets is a separate CGT asset.

    You need to keep records of everything that may be relevant to help you work out your capital gain or capital loss correctly, including:

    • records of the date you acquired an asset and the cost of that asset (for example, the purchase contract)
    • records of the date you disposed of an asset and any proceeds you received when you disposed of it (for example, the sale contract)
    • details of commissions you paid or legal expenses you incurred for an asset
    • details of improvements you made to an asset (for example, building costs such as renovation or structural improvements)
    • any other records relevant to calculating your capital gain or capital loss.

    It is essential to keep good records as there may be a large period of time between acquiring and disposing of your business assets, and without these records you may end up paying more CGT than necessary.

    You must keep these records for five years after you sell or otherwise dispose of an asset, unless you keep an asset register.

    Keeping an asset register may allow you to discard some records that you might otherwise need to keep for a long time. Once details have been entered into the register and the register has been certified by an approved person (such as a registered tax agent), you only have to keep the documents for five years from the date the register is certified.

    See also:

    Last modified: 22 Jun 2017QC 43048