Taxation Ruling
TR 93/3A1 - Addendum
Income tax: trading stock of gold miners
-
Please note that the PDF version is the authorised version of this ruling.View the consolidated version for this notice.
Addendum
This Addendum amends Taxation Ruling TR 93/3 to reflect changes to the law resulting from the operation of the Tax Law Improvement Act 1997 and the repeal of inoperative provisions by the Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006.
TR 93/3 is amended as follows:
Omit the paragraphs; substitute:
1. Section 70-35 of the Income Tax Assessment Act 1997 (ITAA 1997)[1] requires a taxpayer carrying on a business to take into account the value of all trading stock on hand at both the beginning and the end of the income year in determining its taxable income for that year. Section 70-45 provides that trading stock must be valued at the end of the income year at either its: cost; market selling value; or replacement value.
2. The income of gold mining businesses became taxable on 1 January 1991. As a result, the value of trading stock on hand must be taken into account in ascertaining the taxable income of a taxpayer carrying on a business of gold mining.
2. Paragraph 3 and heading to paragraph 6
Omit 'section 31' wherever occurring; substitute 'section 70-45'.
Omit 'TR 92/20'; substitute 'TR 2006/10'.
Omit the paragraph; substitute:
11. The term trading stock is defined in section 70-10(a) to include 'anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a business'.
(a) Omit 'Our view is'; substitute 'The Commissioner considers'.
(b) Omit 'the subsection 6(1) definition of trading stock'; substitute 'the definition of trading stock in section 70-10'.
Omit the paragraph; substitute:
16. Further, the ore to be included in trading stock is to be included as soon as it is severed from the land. There is no reason to delay treating the ore as trading stock until it is stockpiled. Broken ore which is ready to be stockpiled and mined ore which has already been stockpiled, either at the rock face or elsewhere, will be treated as trading stock. Ore which remains attached to the land is not trading stock, even though it may already have been exposed and its value quantified.
7. Paragraph 19 (including heading)
Omit 'section 31' wherever occurring; substitute 'section 70-45'.
Omit the paragraph; substitute:
22. Accordingly, a forward sale price cannot represent the market value of stock on hand.
Omit 'adnusted'; substitute 'adjusted'.
Omit paragraphs; substitute:
29. The gold mining industry is a special case due to the high value of the final product; partly treated and untreated gold ore and occasionally gold tailings are traded in the industry. On this basis, the market selling value may be appropriate to determine the trading stock value.
30. The particular item of trading stock must be in a marketable form to identify a market selling value. In general, the market valuation option does not apply to many forms of work-in-progress as demonstrated in the decision in Parfew Nominees v FCT 86 ATC 4647. This case indicates that a valuation option in section 70-45 may be unavailable to a taxpayer if it is inappropriate in the circumstances.
31. By way of example, if untreated ore is not a tradable commodity, it will be necessary to value that ore either at its cost or its replacement value. Further, market valuation would not be appropriate in the valuation of broken ore, which does qualify as trading stock, if the amount of gold in the ore is not yet ascertained or capable of reasonable estimation.
Omit 'section 31'; substitute 'section 70-45'.
Omit references; substitute:
- -
- ITAA 1997 70-10
- -
- ITAA 1997 70-10(a)
- -
- ITAA 1997 70-35
- -
- ITAA 1997 70-45
- -
- TAA 1953
13. other Rulings on this topic
Omit 'IT 2085'; substitute 'TR 2006/10'.
This Addendum applies on and from 14 September 2006.
Commissioner of Taxation
2 February 2011
References
ATO references:
NO 1-1VBGNF0