Law Administration Practice Statement (GA) PS LA 2004/3 (GA)
Valuation of goods taken from trading stock for private use by sole traders or partners in a partnership
Date of issue: 18 June 2004
Date of effect: 1 July 1997
Draft: False
Withdrawn: False

What this Practice Statement is about: 1. Subdivision 70-D of the Income Tax Assessment Act 1997 contains the rules about including the value of an item of trading stock in assessable income if the trading stock is disposed of outside the ordinary course of business or if the item ceases to be trading stock in certain other circumstances. 2. This Practice Statement explains the approach we will accept to value goods taken from trading stock for private use by sole traders or partners in a partnership. 3. It also specifies record-keeping requirements. | How items of trading stock taken for private use will be valued: 4. How an item of trading stock taken for private use is valued depends on whether the item continues to be held by the same individual or individuals. If it is, it is accounted for at cost. If it is not, it is accounted for at market value. [1] 5. Where an item is taken for private use by: • a sole trader – it is included in assessable income at cost • all the partners in a partnership for their joint use – it is included in assessable income at cost, or • one or more, but not all, of the partners in a partnership – it is included in assessable income at market value. • a sole trader – it is included in assessable income at cost • all the partners in a partnership for their joint use – it is included in assessable income at cost, or • one or more, but not all, of the partners in a partnership – it is included in assessable income at market value. 6. However, in regard to this last point, we accept that where the items are of small value, such that it is difficult or unreasonable for records to be kept (see paragraph 7 of this Practice Statement), the items are taken for joint private use of all of the partners in the partnership and can be accounted for at cost. | Record keeping: 7. The following records should be kept in relation to goods taken for private use: • the date the item is taken from stock • the reason the item is taken • a description of the item, and • the cost or market value of the item (see also paragraphs 8 and 9 of this Practice Statement). • the date the item is taken from stock • the reason the item is taken • a description of the item, and • the cost or market value of the item (see also paragraphs 8 and 9 of this Practice Statement). | Establishing cost or market value in difficult situations: 8. It can be difficult to determine the value of items of trading stock taken for private use in industries where the items of trading stock are: • used in a manufacturing process • a range of small items or ingredients, usually of low value • not suited to inventory systems • subject to high turnover. • used in a manufacturing process • a range of small items or ingredients, usually of low value • not suited to inventory systems • subject to high turnover. 9. For taxpayers in these industries, we publish a schedule which provides amounts that we will accept as estimates of the value of goods taken from trading stock for private use. See Using trading stock for private purposes . | Example 1 – sole trader: 10. Peter Purple operates a sole trader business as a butcher. He takes a leg of lamb home for his private use. The cost of the leg of lamb is required to be included in the assessable income of the business. | Example 2 – sole trader: 11. Over the income year, Peter Purple regularly takes home various cuts of meat for his private use. He lives with his wife and a 10-year-old child. 12. Peter may account for the items by recording the cost of the items as he takes them and include the total amount as assessable income of the business for that income year. 13. Alternatively, Peter can use the schedule published by us each year to calculate the total value of items taken and include that total in the assessable income of the business for the income year. If he did this, the amount that he would include should be calculated at the butcher's rate for 2 adults and one child (16 years or under). | Example 3 – partnership: 14. Max and Perdita operate a partnership business together as butchers. They have a joint birthday party and decide to have a spit roast. They take a whole pig from the partnership's trading stock for this purpose. The cost of the whole pig is required to be included in the assessable income of the partnership business. 15. At other times during the income year, Max and Perdita separately take items of trading stock for their private use. Max lives with his wife and a 16-year-old child and Perdita lives with her husband and a 17-year-old child. 16. The partnership business may account for the items of trading stock taken at cost and include the total amount as assessable income of the business for that income year. 17. Alternatively, the partnership business can use the schedule published by us each year to calculate the total value of items taken and include that total in the assessable income of the business for the income year. If they did this, the amount that they would include should be calculated at the butcher's rate for 5 adults (including children over 16 years) and 1 child (16 years or under). | More information: 18. For more information on accounting for any business trading stock that you've taken for private purposes, see Using trading stock for private purposes .

Legislative references: ITAA 1997 Subdiv 70-D | ITAA 1997 70-90 | ITAA 1997 70-100 | ITAA 1997 70-110

Additional content:
Removed reference to 'TD 2024/8' and replaced with a link to our website content and other minor editorial changes. | Updated to align with amended Practice Statement style and formatting requirements. | Updated in line with current ATO style and accessibility requirements. | More information and Contact information | Updated to remove references to specific years. Updated examples to remove amounts and instead explain the method. | Related Rulings/Determinations | Updated to new LAPS style and format. | Updated – modified and elaborated. | Updated income year from '2013/14' to '2014/15' and 'TD 2014/2' to 'TD 2015/9'. | Updated 'TD 2014/2' to 'TD 2015/9'. | Updated income year from '2012/13' to '2013/14' and 'TD 2013/3' to 'TD 2014/2'. | Updated 'TD 2012/20' to 'TD 2014/2'. | Updated income year from '2011/12' to '2012/13' and reference from 'TD 2012/20' to 'TD 2013/3'. | Updated to current corporate publication style. | Updated income year from '2010/11' to '2011/12' and reference from 'TD 2011/11' to 'TD 2012/20'. | 'Tax Office' updated to ATO as per Style Guide recommendations. | Dates updated to current year. | [1] See sections 70-90 to 70-110 of the Income Tax Assessment Act 1997 . | File 2001/001048; 1-14PA5SZY; 1-1B7MMD56