Prepare for stocktake

All businesses must account for the value of their trading stock at the end of each income year (closing stock) and at the start of the next income year (opening stock). Trading stock is anything your business acquires, produces or manufactures, for the purposes of manufacturing, selling or exchanging.

Don’t forget to account for any trading stock you use for private purposes. If you take an item of your business's trading stock for your private use, you need to:

• account for it as if you had sold it
• include the value of the item in your business's assessable income.

You’re required to do a stocktake as close as possible to the end of each income year.

A stocktake involves counting and checking all products, goods or inventory in your business to make sure your records are accurate and correct. A stocktake lets you work out the value of your trading stock at the end of financial year for business or tax purposes.

Simpler trading stock rules for small business

If you're a small business with an aggregated turnover of less than $10 million a year, and you estimate that the value of your trading stock changed by no more than $5,000 in the year, you don't have to:

• conduct a formal stocktake
• account for the changes in your trading stock’s value.

As well as meeting your tax obligations, benefits of doing a stocktake can include:

• gaining a better understanding of your stock levels
• making sure you don’t have too much or too little inventory on hand
• identifying what inventory you need to buy
• improving your cash flow by identifying and reducing slow moving stock
• detecting theft and gaps in your stock levels
• reviewing your pricing strategy.

As well as the benefits, doing a stocktake can come with costs, including:

• accidental damage since people are physically handling your stock
• extra employees costs that you hire to help with the stocktake
• possible lost income due to taking time to check inventory rather than selling goods and services.

Follow these steps to prepare for and conduct a stocktake for your business.