Flashcards in Week 7: Trading Stock Ch 17 & Capital Write Offs Ch 16 Deck (12)
What is Trading Stock CH 17 about?
Looks at meaning of 'trading stock' (TS)
General treatment of TS
How to account and value TS under special provisions
What is Trading Stock?
Revenue asset HELD by taxpayer fir purpose of manufacture, sale/exchange in ordinary course of business
What can trading stock include?
Land held by developer
Shares held by share trader
What is the difference between TS and capital asset? Use an e.g.
fridge owned by a milk bar proprietor for storing milk = depreciating asset
milk stored in the fridge will be TS that will be dealt with under the general taxation rules.
How do you account for trading stock?
Excess is assessable when closing stock > opening stock
Excess is 'deductible' when closing stock < opening stock
When does trading stock become deductible?
In year becomes 'on hand'
What are the 3 factors for which a trading stock to be classified as 'on hand'?
Taxpayer must have the power to dispose of the trading stock
- Farnsworth (1949) fruit
Taxpayer need not necessarily have legal ownership of the trading stock – Suttons Motors (1985)
Taxpayer need not necessarily have physical possession of the trading stock – All States Frozen Foods (1990) Goods in Transit
Taxpayers can choose to value each item of stock on hand at the end of each income year based on:
Market selling value
What happens if trading stock is obsolete?
elect alternative value
When can capital expenditure be deductible?
satisfies the requirements of a specific deduction provision
What does the Capital Write offs chapter focus on?
‘capital allowance regime’ in div 40 ITAA97 and
‘capital works regime’ in div 43 ITAA97.