ATO Interpretative Decision
ATO ID 2002/1033 (Withdrawn)
Income Tax
Trading Stock - Cessation of businessFOI status: may be released
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The decision is a straightforward application of the 'excepted person' definition in section 102AC, ITAA 1936, and is not interpretative within the meaning of PSLA 2001/8.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 8 May 2009
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
On ceasing business, does the taxpayer stop holding an item as trading stock, for the purposes of section 70-110 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes. The taxpayer stops holding an item as trading stock, for the purposes of section 70-110 of the ITAA 1997.
Facts
The taxpayer, a sole trader, held certain items as trading stock of his business.
The taxpayer ceased carrying on his business in the 2001 tax year, but continues to solely own these item (these items are not livestock).
Reasons for Decision
Section 70-110 of the ITAA 1997 applies if a 'taxpayer stops holding an item as trading stock but still owns it'.
The definition of trading stock in section 70-10 of the ITAA 1997, applies from 1 July 1997 and includes a requirement that an item be held 'in the ordinary course of business' (this was not part of the definition of trading stock in section 6 of the Income Tax Assessment Act 1936). On ceasing business, an item is no longer held 'in the ordinary course of that business'. Therefore, the taxpayer stops holding these items as trading stock.
Date of decision: 5 July 02Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 70-110
section 70-10
section 6
Keywords
Trading stock
Trading stock on hand
Cessation
Closing Stock
ISSN: 1445-2782
| Date: | Version: | |
| 5 July 2002 | Original statement | |
| You are here → | 8 May 2009 | Archived |