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  • 40 Closing stock



    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    If the partnership is a small business entity choosing to use the simplified trading stock rules, see the information for small business entities below, otherwise, go to All other businesses.

    Small business entities

    Small business entities only need to account for changes in the value of trading stock if the value of stock on hand at the start of the income year and a reasonable estimate of the value of stock on hand at the end of the income year varies by more than $5,000.

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    Small business entities who wish to do so can still conduct a stocktake and account for changes in the value of trading stock.

    If the difference between the value of opening stock and a reasonable estimate of closing stock is more than $5,000, the partnership must account for the change in the value of trading stock, go to step 2. If the difference is not more than $5,000, go to step 1.

    Step 1

    If the difference referred to above is $5,000 or less and the partnership chooses not to account for this difference, the closing stock value at D is the same as the value at C item 38. Do not put the reasonable estimate at D.

    Print in the CODE box at the right of D the code letter from table 6 that matches the code the partnership used to value closing stock in the previous year.

    Table 6


    Valuation method




    Market selling value


    Replacement value

    If this is the partnership’s first year in business, the value of the closing stock will be zero; print C in the CODE box.

    Step 2

    If the difference referred to above is more than $5,000 or the partnership chooses to account for the difference in trading stock, the closing stock values must be brought to account under section 70-35 of the ITAA 1997. See the information for All other businesses for instructions on how to calculate the value of closing stock.

    The partnership must include in the closing stock value at D the value of all stock on hand, regardless of whether the partnership has paid for the stock.

    All other businesses

    Show at D the total value of all trading stock on hand at the end of the income year or accounting period for which the partnership tax return is being prepared. The amount at D is the value calculated for income tax purposes under section 70-45 of the ITAA 1997.

    If the partnership is registered for GST or required to be registered for GST, the value of closing stock (other than items the supply of which was not a taxable supply) should not include an amount equal to the input tax credit that would arise if the partnership had acquired the item solely for business purposes at the end of the income year. Input tax credits do not arise for some items of trading stock, such as shares.

    Include motor vehicle floor plan stock and work in progress of manufactured goods.

    Do not include any amount for closing stock of a business that ceased operations during the income year; show this amount at Total business income item 5.

    Print in the CODE box the code from Table 6 indicating the method used to value closing stock for income tax purposes. If you use more than one method, use the code for the method representing the greatest value.

    You can use different methods to value the same item of trading stock in different income years, and you can value similar items using different methods in the same income year.

    However, the opening value of an item in a particular income year must equal the closing value for that item in the previous income year. The partnership cannot reduce the value of stock on hand by creating reserves to offset falls in the value of stock or any other factors. Keep records showing how each item was valued.

    The partnership may elect to value an item of trading stock below the lowest value calculated by any of these methods because of obsolescence or other special circumstances, but the value in the election must be reasonable. If you elect to value an item of trading stock below cost, market selling value and replacement value, see item 46 Trading stock election.

    If you include incorrect trading stock information on the tax return, advise us by submitting a full statement of the facts, accompanied by a reconciliation of the value of stock as returned for each income year with the values permissible under the law.

    Partnerships engaged in manufacturing include the value of partly manufactured goods as part of their stock and materials on hand at the end of the income year.

    See also:

    • Section 70-10 of the ITAA 1997
    • TR 98/7 Income tax: whether packaging items (ie, containers, labels, etc) held by a manufacturer, wholesaler or retailer are trading stock

    Items 41 and 42 below reflect amounts calculated for accounting purposes.

    Last modified: 12 Feb 2019QC 44345