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Australia Trading Stock Guide

Australian trading stock tax rules. The guide covers: the trading stock definition — the 'trading stock' is the 'goods held by the taxpayer for the 'sale in the ordinary course of the business'' under the 'Section 70-10 of the ITAA 1997'; the 'trading stock' includes: (i) the 'finished goods' (the 'products ready for the sale'), (ii) the 'work in progress' (the 'partially completed goods'), (iii) the 'raw materials' (the 'materials used in the manufacturing'), (iv) the 'livestock' (the 'animals held for the sale'), (v) the 'consumables' (the 'supplies used in the business'); the valuation of the trading stock at the year-end — the 'taxpayer must value the trading stock at the 'end of the income year' (the 'closing stock value') and the 'opening stock value' (the 'stock at the start of the year'); the 'closing stock' can be valued at the 'cost', the 'market value', or the 'replacement value' — the 'taxpayer can choose the 'lowest value' (the 'cost or the market value or the replacement value — the 'lowest of the three' for the 'each item of the stock'); the 'valuation at the cost' — the 'cost' is the 'purchase price' plus the 'freight', the 'insurance', the 'import duties', and the 'other costs of the acquisition' (the 'cost of the goods'); the 'valuation at the market value' — the 'market selling value' is the 'price that the stock can be sold in the ordinary course of the business' (the 'net realisable value'); the 'valuation at the replacement value' — the 'replacement value' is the 'cost of replacing the stock at the end of the income year'; the obsolescence and the write-down of the stock — the 'obsolete stock' (the 'stock that is no longer saleable') can be 'written down' to the 'market value' (the 'net realisable value' — the 'scrap value'); the 'write-down of the obsolete stock' is the 'deduction' for the 'decline in the stock value' (the 'obsolescence deduction'); the 'stock that is 'damaged', the 'outdated', or the 'obsolete' can be 'valued at the reduced market value'; the livestock valuation for the primary producers — the 'primary producers' (the 'farmers') can value the 'livestock' (the 'cattle', the 'sheep', the 'pigs', the 'goats', the 'horses') using the 'cost price method', the 'market value method', or the 'bush heritage value method'; the 'bush heritage value method' allows the 'farmer to value the livestock at the 'bush heritage value' (the 'fixed value per head' set by the 'ATO' — approximately $3.59 per head for the sheep, $60.71 per head for the cattle for the '2024-25 year'); the 'bush heritage value' is the 'conservative value' that is 'lower than the market value' and 'reduces the tax on the sale of the livestock'.

Trading Stock Valuation

  • Cost method: The 'trading stock' is valued at the 'cost' (the 'purchase price' plus the 'acquisition costs'). The 'cost' includes the 'purchase price', the 'freight', the 'insurance', and the 'import duties'.
  • Market value method: The 'trading stock' is valued at the 'market selling value' (the 'net realisable value' — the 'price that the stock can be sold in the ordinary course of the business').
  • Replacement value method: The 'trading stock' is valued at the 'cost of replacing the stock at the end of the income year'.

For the business expenses and the deductions, see our Business Expenses Guide →.

Obsolescence & Write-Downs

  • Obsolete stock: The 'obsolete' or the 'damaged' stock can be 'written down' to the 'market value' (the 'scrap value' or the 'reduced value'). The 'write-down' is the 'deduction' for the 'decline in the stock value'.
  • Stock write-off: The 'stock that is 'destroyed' or 'unsaleable' can be 'written off' and 'deducted' from the 'assessable income'.

For the primary production and the farming tax rules, see our Primary Production Guide →.

Livestock Valuation

  • Cost price: The 'livestock' is valued at the 'cost of the acquisition' (the 'purchase price' and the 'breeding costs').
  • Market value: The 'livestock' is valued at the 'market selling value' at the 'end of the income year'.
  • Bush heritage value: The 'fixed value per head' set by the 'ATO' — approximately $3.59 per head for the 'sheep' and $60.71 per head for the 'cattle' for the '2024-25 year'.

For the primary production and the income averaging for the farmers, see our Primary Production Guide →.