Document ID: chunk:federal_register_of_legislation:C2004C00927:clause:1_13:p1
Version: federal_register_of_legislation:C2004C00927
Segment Type: clause
Provision Reference: sch 1 cl 13 (pt 1/13)
Character Range: 381485–384195

13  After Part 2-20
Insert:

Part 2-25—Trading stock

Division 70—Trading stock

Table of Subdivisions

 Guide to Division 70
70-A What is trading stock
70-B Acquiring trading stock
70-C Accounting for trading stock you hold at the start or end of the income year
70-D Assessable income arising from disposals of trading stock and certain other assets
70-E Miscellaneous

70-1  What this Division is about

      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.

Subdivision 70-A—What is trading stock

Table of sections

70-10 Meaning of trading stock

70-10  Meaning of trading stock

  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.

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 Act 1936.

Subdivision 70-B—Acquiring