Prepare For Stocktake – Conducting A Stocktake

You might need to do a stocktake for tax purposes if your business acquires or sells stock. Learn how to do a stocktake and how it might benefit your company.

A stocktake is counting and inspecting every inventory, assets, and products in your company to ensure that all of your records are accurate. For commercial or tax purposes, a stocktake enables you to determine the value of your trading stock at the end of the financial year.

What is a stocktake?

At the end of each income year (closing stock) and the beginning of the next income year, all firms and businesses are required to account for the value of their trading stock (opening stock). Whatever your company acquires, produces, or manufactures with the intention of manufacturing, selling, or exchanging is considered trading stock.

Any trading stock you utilise for personal gain must be reported. If you take a portion of your company’s trading stock for personal use, you must:

Treat it as though you were selling it

Include the item’s worth in the assessable income for your business

A stocktake must be completed as soon as possible after the conclusion of each income year.

Simplified Stock Trading Regulations for Small Businesses

If your company has an annual revenue of less than $10 million and you believe that the value of your trading shares changed no more than $5,000 over the year, you are exempt from the following requirements:

• carry out a formal inventory
• take into consideration the fluctuations in the value of your trading stock

The Benefits of a Stocktake

An advantage of conducting a stocktake is that it can help you meet your tax requirements as well as:

• improving your knowledge of your stock levels
• ensuring that you don’t have an excessive amount of merchandise on hand
• determining the inventory you need to purchase
• enhancing your cash flow by figuring out and getting rid of your slow-moving stock
• identifying theft and inconsistencies with your stock levels
• examining your pricing plan

The Expenses of a Stocktake

A stocktake might have costs in addition to advantages, such as:

• Accidental harm because your goods is being handled physically by others
• the price of hiring additional staff to assist with the stocktake
• Potential financial loss from spending time checking inventories rather than marketing products and services

Conducting a Stocktake

In order to conduct a stocktake, you must physically count your inventory and value each item using one of three techniques:

Cost Price Method: All expenses incurred in bringing the stock to its current state and location are included in the cost price method. This could be the cost price plus freight, insurance, excise and customs taxes, as well as delivery fees.

Market Selling Value Method: If a stock is sold in the regular course of business, its current value is used in the market selling value approach.

Replacement Value Method: The replacement value technique uses the cost to get a product that is on sale the last day of the tax year that is almost identical to the one that was purchased.

Each year, you can select a different approach for certain stock items.

When determining the value of your trading stock, you typically exclude the GST component if you are eligible for GST credits.

A thorough inventory will allow you to give accurate inventory data, which will have a direct influence on your financial statements and tax obligations.

Your business must do a stocktake by June 30, 2023, as the fiscal year comes to a close, in order to fulfil its tax obligations.

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