You can use the simplified trading stock rules if:
- either
- you are a small business with an aggregated turnover of less than $10 million a year or
- you would be a small business except your aggregated turnover is $10 million or more but less than $50 million – for income years starting on or after 1 July 2021, and
- you estimate that the value of your trading stock changed by $5,000 or less in the year.
If you use the simplified rules, you don't have to:
- conduct a formal stocktake
- account for the changes in your trading stock’s value.
Your estimate will be considered reasonable if either:
- you maintain a constant level of stock each year and have a reasonable idea of the value of your stock on hand
- your stock levels fluctuate but you can make an estimate, based on your records, of the stock you have purchased.
If the difference in your trading stock’s value during the year varied by more than $5,000, use the general trading stock rules.
Under the general trading stock rules, an increase in your trading stock’s value over the year is assessable income, while a decrease is an allowable deduction.
There are other rules for when you use trading stock for private purposes.
Example: value of trading stock changes
Joel runs a knitwear store and the value of his opening stock for 2023–24 is recorded as $5,600.
If Joel makes a reasonable estimate that the value of his closing stock at the end of 2023–24 is:
- $8,000 – as the difference is no more than $5,000, he doesn't need to do a stocktake or include the increase in value of his stock in his assessable income
- $12,000 – as the difference between the opening stock ($5,600) and his reasonable estimate of the closing stock ($12,000) is greater than $5,000, Joel must do a stocktake and include the increase in value of his stock in his assessable income for 2023–24.