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ATO Interpretative Decision

ATO ID 2003/90

Income Tax

Simplified Tax System (STS): Disposal of trading stock
FOI status: may be released

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CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Can an STS taxpayer make an election under subsection 70-100(4) of the Income Tax Assessment Act 1997 (ITAA 1997) to treat an item of trading stock as disposed of at closing value?

Decision

Yes. Provided the conditions in section 70-100 of the ITAA 1997 are satisfied, an STS taxpayer can make an election under subsection 70-100(4) of the ITAA 1997 to treat their trading stock as disposed of at a closing value, other than market value.

Facts

An STS taxpayer disposes of their trading stock outside the ordinary course of business for the purposes of subsection 70-100(1) of the ITAA 1997. They retain an interest in the stock after this disposal. The conditions in subsection 70-100(6) of the ITAA 1997 are satisfied. The STS taxpayer wishes to make an election under subsection 70-100(4) of the ITAA 1997.

Reasons for Decision:

When trading stock is transferred from one entity to another, an election is available under subsection 70-100(4) of the ITAA 1997 that allows trading stock to be valued at tax or book value, rather than market value, if certain conditions are met as outlined in subsection 70-100(6) of the ITAA 1997.

There is no specific provision that provides how subsection 70-100(4) of the ITAA 1997 applies to an STS taxpayer. In the absence of any express rule preventing an STS taxpayer from making an election under subsection 70-100(4) of the ITAA 1997, or any evidence of a legislative intent to do so, an STS taxpayer is able to make such an election provided the conditions in section 70-100 of the ITAA 1997 are met.

Date of decision:  31 January 2003

Year of income:  Year ended 30 June 2003

Legislative References:
Income Tax Assessment Act 1997
   subsection 70-100(1)
   subsection 70-100(4)
   subsection 70-100(6)

Related ATO Interpretative Decisions
ATO ID 2003/91

Keywords
Disposal of trading stock
Disposals not in the ordinary course of business
Simplified Tax System
STS taxpayers
Trading stock for STS taxpayers

Business Line:  Business & Personal Tax Centre of Expertise

Date of publication:  15 March 2003

ISSN: 1445-2782

history
  Date: Version:
You are here 31 January 2003 Original statement
  30 November 2007 Archived

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