Draft Taxation Determination

TD 93/D106

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

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/125.

FOI status:

draft only - for comment

Preamble

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 stock-take.

Commissioner of Taxation
29 April 1993

References

BO SSO TD 08

Related Rulings/Determinations:

IT 2670
IT 2350

Subject References:
trading stock on hand
completion of stocktake

Legislative References:
ITAA 28(1)