Document ID: chunk:federal_register_of_legislation:C2025C00029:section:30:p16
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 30 (pt 16/19)
Character Range: 1540893–1543548

This Division deals with amounts you can deduct, and amounts included in your assessable income, because of these situations:
         • you acquire an item of trading stock;
         • you carry on a business and hold trading stock at the start or the end of the income year;
         • you dispose of an item of trading stock outside the ordinary course of business, or it ceases to be trading stock in certain other circumstances.

Table of sections
70‑5 The 3 key features of tax accounting for trading stock

70‑5  The 3 key features of tax accounting for trading stock
  The purpose of income tax accounting for trading stock is to produce an overall result that (apart from concessions) properly reflects your activities with your trading stock during the income year.
  There are 3 key features:
 (1) You bring your gross outgoings and earnings to account, not your net profits and losses on disposal of trading stock.
 (2) Those outgoings and earnings are on revenue account, not capital account. As a result:
 (a) the gross outgoings are usually deductible as general deductions under section 8‑1 (when the trading stock becomes trading stock on hand); and
 (b) the gross earnings are usually assessable as ordinary income under section 6‑5 (when the trading stock stops being trading stock on hand).
 (3) You must bring to account any difference between the value of your trading stock on hand at the start and at the end of the income year. This is done in such a way that, in effect:
 (a) you account for the value of your trading stock as assessable income; and
 (b) you carry that value over as a corresponding deduction for the next income year.
Note: You may not have to bring to account that difference if you are a small business entity: see Division 328.

Subdivision 70‑A—What is trading stock

Table of sections
70‑10 Meaning of trading stock
70‑12 Registered emissions units

70‑10  Meaning of trading stock
 (1) Trading stock includes:
 (a) anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a *business; and
 (b) *live stock.
 (2) Trading stock does not include:
 (a) a *Division 230 financial arrangement; or
 (b) a *CGT asset covered by section 275‑105 that:
 (i) is owned by a *complying superannuation entity; or
 (ii) is a *complying superannuation asset of a *life insurance company.
Note 1: Shares in a PDF are not trading stock. See section 124ZO of the Income Tax Assessment Act 1936.
Note 2: If a company becomes a PDF, its shares are taken not to have been trading stock before it became a PDF. See section 124ZQ of the Income Tax Assessment