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Taxation Determination

TD 93/125

Income tax: is it necessary to do a stocktake at the end of the year ?

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FOI status:

may be releasedFOI number: I 1215314

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

1. In most cases, yes. Subsection 28(1) the Income Tax Assessment Act 1936 requires that the value of all trading stock on hand at the end of the year of income be arrived at in order to calculate the taxpayer's taxable income. The Act does not stipulate that it is necessary to do a physical stocktake but in the majority of instances there is no other way of arriving at an accurate value and a physical stocktake should be completed. This should be done as close as possible to the end of the year.

2. It is not sufficient to guess the value of trading stock on hand nor is it sufficient to estimate its value based on a stocktake completed in an earlier year.

3. In some businesses purchases and sales of trading stock are recorded in such a way that a continuous record is maintained of stock on hand. This record is adjusted by completing regular stocktakes throughout the year on different sections of the stock in order to bring to account any losses or errors in the system. We consider that if this record is properly maintained, stocktakes completed regularly throughout the year and all items of stock counted at least once then the value of stock on hand can be arrived at without the need to complete a year end stocktake.

Commissioner of Taxation
1/7/93

Previously issued as Draft TD93\D106

References

ATO references:
NO SSO TD 08

ISSN 1038 - 8982

Related Rulings/Determinations:

IT 2670;
IT 2350

Subject References:
trading stock on hand;
completion of stocktake

Legislative References:
ITAA 28(1)

TD 93/125 history
  Date: Version: Change:
You are here 1 July 1993 Original ruling  
  29 November 2006 Original ruling + note Repeal provision note
  17 August 2011 Consolidated ruling Addendum

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