• Oyster farmers: calculating the value of trading stock

    All oyster farmers must account for oysters on hand as trading stock. This includes oysters held on sticks or in trays, or harvested and held ready for sale.

    You can choose to value your trading stock on hand at the end of the income year at cost, market selling value or replacement value.

    If you use the traditional stick farming method, you must bring to account as trading stock the oysters you acquired as spat that are still on hand at the end of an income year.

    To make it easier to meet your tax obligations, you can use the 'per stick' method to calculate the value of trading stock at the end of each income year.

    Find out about:

    The 'per stick' farming method of valuation

    To be eligible to use the 'per stick' farming method of valuation, you will need to meet the following requirements:

    • you carry on a business of oyster farming
    • the oysters are for human consumption – for example, not pearling oysters
    • you use the traditional stick farming method - that is, catching oysters as spat by placing wooden sticks or plastic slats in the water.

    This valuation method is still allowable if you caught the spat by the traditional method, knocked the oysters off the sticks and placed them into trays or baskets (or some other container) in the water to continue to grow.

    Oyster trading stock that has been harvested, or is acquired by any other means can't be accounted for using the per stick method. If you have not previously accounted for trading stock or used the per stick method, talk to your tax professional or contact us for advice.

    How to value your trading stock

    The following steps show you how to calculate your trading stock under the 'per stick' method.

    1. Count the number of wooden sticks and plastic slats in each of the following categories:
       
      • Count the wooden sticks that were in use at the end of the income year to capture spat. Add to that the number of wooden sticks that are no longer in use but were used to capture oysters that are still on hand at the end of the income year. If any sticks were used more than once to capture stock on hand, count each re-use as another stick for the purposes of this count.
      • Count the one-metre plastic slats that were in use at the end of the income year to capture spat. Add to that the number of one-metre plastic slats that are no longer in use but were used to capture oysters that are still on hand at the end of the income year. If any one-metre plastic slats were used more than once to capture stock on hand, count each re-use as another one-metre plastic slat for the purposes of this count.
      • Count the two-metre plastic slats that were in use at the end of the income year to capture spat. Add to that the number of two-metre plastic slats that are no longer in use but were used to capture oysters that are still on hand at the end of the income year. If any two-metre plastic slats were used more than once to capture stock on hand, count each re-use as another two-metre slat for the purposes of this count.
       
    2. Multiply by $1.00 the number of wooden sticks and two-metre plastic slats counted by the above method to capture the trading stock on hand at the end of the income year.
       
    3. Multiply by $0.50 the number of one-metre plastic slats counted by the above method to capture the trading stock on hand at the end of the income year.
       
    4. Add together the amounts calculated by steps 2 and 3. This will provide the value of oysters to be included as stock on hand at the end of the income year.

    Example: Calculating trading stock using 'per stick' method

    Robert is an oyster farmer who is eligible to use the 'per stick' method of valuation.

    At the end of the income year, Robert had only wooden sticks and one-metre plastic slats in the water to capture oyster spat, as well as oysters in trays at various stages of maturity in the water.

    Step 1:

    Robert had 3,000 wooden sticks in the water at 30 June 2015 at the end of the financial year, and estimates that the oysters currently in the trays were captured using 6,000 wooden sticks this income year. Robert does not re-use any of his wooden sticks.

     

    Therefore, the total number of wooden sticks used this income year to acquire the stock is 9,000.

     

    Robert calculates that he had 2,000 one-metre plastic slats in the water at the end of the financial year, and the oysters in the trays were captured using 1,000 of the plastic slats (that are currently in the water being re-used) and another 1,000 plastic slats that were each used twice.

     

    Therefore, Robert used a total of 5,000 one-metre plastic slats this financial year.Robert does not use any plastic slats that are two metres long.

     

    Step 2:
    The number of wooden sticks used is 9,000. Therefore the result of step 2 is $9,000.

     

    Step 3:
    The 5,000 one-metre plastic slats from step 1 are multiplied by $0.50 to give $2,500.

     

    Step 4:
    The result of steps 2 and 3 are added together:

    $9,000 + $2,500 = $11,500.

    This means that the value of Robert's trading stock at the end of the income year is $11,500.

    End of example

    See also:

    Simplified trading stock rules for small businesses

    You are able to use the simplified trading stock rules if you:

    • carry on an eligible small business in that year
    • have an aggregated turnover of less than $2 million. This is your annual turnover plus the annual turnovers of any entities you are connected to or affiliated with.

    Under the simplified trading stock rules, you do not have to account for changes in the value of your trading stock, or do stocktakes for tax purposes, if the difference between the value of your opening stock and a reasonable estimate of your closing stock is $5,000 or less.

    You may still choose to conduct a stocktake and account for changes in the value of your trading stock.

    Example: Value of stock is under $5,000

    Joe is an oyster farmer and is a small business entity. The value of his stock on hand at the beginning of the income year is $4,000 and he estimates that the value of stock on hand at the end of the income year is $5,000.

    The difference between the value of stock on hand at the beginning of the income year and a reasonable estimate of the value of stock on hand at the end of the income year is $1,000. Since this difference is $5,000 or less, Joe does not need to work out the actual value of stock on hand or account for the change in value when he works out his assessable income.

    End of example

    See also:

    For information on your personal circumstances, you can phone us on 13 28 66.

      Last modified: 24 Aug 2016QC 16675