Draft Taxation Determination

TD 92/D203

Income tax: banana growers - what expenses should be included in a cost price valuation of trading stock on hand at the end of the financial year under subsection 31(1) of the Income Tax Assessment Act 1936?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/47.

FOI status:

Preamble

1. All harvesting and processing expenses incurred by a grower in relation to bananas which form part of a grower's trading stock must be included in the calculation of its cost price value. If it is difficult to precisely match specific expenses to the stock, we will accept a reasonable estimate

2. Some expenses which are incurred prior to harvesting should also be included. These are recurring annual expenses, particularly those which relate to some thing to do with the fruit rather than to the tree or the soil. One example is the cost of putting ripening bags on the bunches of bananas.

3. However, we recognise that:

a)

the quantity of stock on hand at any one time is small relative to total production;

b)

some expenses are very difficult in practice to allocate to the value of stock on hand:

c)

the amounts in question may be small.

4. Because of the above factors, we will generally accept valuations which include only the harvesting and processing expenses.

Example

Mr Cavendish is a banana grower. As at 30 June he had 200 cartons of bananas which had been picked and were not sold until July. His total production for the financial year was 5,000 cartons of bananas. His total picking and processing expenses for the year were $24,000. He calculate sthe value of stock as: 200 divided by 5,000 multiplied by 24000. The value of stock on hand is $960. We will accept this method of valuation

Commissioner of Taxation
12/11/92

References

ATO references:
NO TOW 04 (Townsville)

Subject References:
bananas
trading stock

Legislative References:
ITAA 31(1)