Stocktaking legal obligations

You may be legally required to perform an annual stocktake of your trading stock for tax purposes. The Australian Taxation Office (ATO) describes trading stock as 'anything you produce, manufacture, acquire or purchase for manufacture, sale or exchange'.

Under Australian tax law, you must record the value of all trading stock you have on hand at the beginning of your income year, usually 1 July, and at the end of your income year, usually 30 June (in your first year of trading, this may not be a full financial year). This is so you can work out whether or not you have a taxable income for the year. The best way to work out the value of your stock on hand is to count and value it by performing a stocktake.

If the value of the stock at the end of the financial year is more than it was at the beginning of that year, you must include the difference as part of your assessable income when you lodge a tax return. If the value of stock at the end of the year is less than it was at the beginning of that year, your assessable income will be reduced by that difference.

If you can make a reasonable estimate of the value of your stock and you believe the change in your stock value over the year is less than $5000, you may choose not to do a stocktake. However, performing an annual stocktake is a valuable method of stock control and you may decide to do one anyway.

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