The value of your trading stock is used to calculate you assessable income / deductions. 

Where the value of closing stock exceeds the value of opening stock, the amount of the excess is assessable.  Where the value of opening stock exceeds the value of closing stock, the amount of the excess is deductible.

Therefore – the higher the value you place on your closing stock the higher your taxable income will be and the lower the value the lower your taxable income and therefore the lower your tax liability.

Whatever the basis adopted in valuing trading stock for accounting purposes, for tax purposes a taxpayer may adopt any one of three bases for valuing trading stock, including live stock.

The three bases are:

1. Cost;

2. Market selling value

3. Replacement value

A different basis may be adopted for each class of stock and even for each individual item of stock. The basis adopted for any one item may also be changed at will each year.

Division 70 Income Tax Assessment Act  1997

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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