• Valuing trading stock

    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 assessable income, while a decrease is an allowable deduction.

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

    Table 2: Stocktake methods

    Method

    Valuation basis

    Cost

    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.

    Market selling value

    The current value of stock if sold in the normal course of business.

    Replacement value

    What it would 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.

    When calculating your trading stock’s value, you generally exclude the goods and services tax (GST) component if you are entitled to GST credits.

    See also:

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

    Last modified: 13 Mar 2015QC 44444