Draft Taxation Determination

TD 92/D190

Income tax: is it always necessary for a retailer to make a police complaint before the benefit of a deduction for stock shortages will be accepted?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/51.

FOI status:

Preamble

1. No. A police complaint is only one form of evidence of a stock shortage.

2. Where there is sufficient other evidence establishing the shortage, the retailer is not required, under section 28 of the Income Tax Assessment Act 1936, to bring the missing items into the closing stock figure.

Example:

Grant is the owner of a jewellery store. After a physical stocktake and a comparison with inventory records, he discovers several jewellery items are missing. It is not the normal industry practice to report the shortage to the police where the circumstances of the loss are unknown. Accordingly a police report will not be required. Grant will not be required to include the missing items in his closing stock.

Commissioner of Taxation
29/10/92

References

ATO references:
NO TOW11

Subject References:
closing stock
jeweller
jewellery
losses
police complaint
retail trade
retailer
stock shortage
substantiation
theft
trading stock on hand

Legislative References:
ITAA 28