Do i need to do a stocktake?

[retrogeekaustralia]

Hi Guys,

I'm in a bit of a dilemma of whether or not i am required to do a stock take for my business?

When i first saw my dad's accountant over 12 months ago she never mentioned to me that i was required to do one, however it looks like everyone on here is doing it.

From the looks of the ATO website here:

http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/76494.htm&page=19&H19

in my head it read that i am required to do it however my partner reads it differently. It says you may not be required to do a stock take if you turnover is less than 2 million (which mine isn't by a long shot) AND the difference between the value of your opening stock and a reasonable estimate of your closing stock is $5,000 or less.

I however have no opening stock value as i never did a stocktake, so basically the difference would be the value of my stock minus $0 which would be well over $5000. Because of the use of the word AND in the statement on that website though, then wouldn't that mean if i don't meet both of those requirements then i don't have to do one?

If i am required then shouldn't it say something like :

You may not be required to do a stock if you annual turnover is under 2 million OR the difference between your opening stock and closing stock is 5000 or less.

My partner's mum is also an accountant and reads that website as me not needing to do one.

So im very confused now, i was sure i needed to do one. If it turns out i do need to do a stock take, then wouldn't i basically have to add up the cost value of my stock (say $7000) and then add that onto my yearly profit (say $40,000 sales, minus $30,000 expenses makes 10,000 taxable income + $7000 in stock adjusting my taxable income to $17,000?) This should make up for the previous year not doing a stock take right? because i am adding the entire value of stock?

[punch*drunk]

Simplified Tax System.....might be called something else now.

http://www.ato.gov.au/businesses/content.aspx?doc=/content/00231250.htm&page=3&H3

Check with your accountant and see if your eligible, you may already be using this system.

[the-kazbar]

it will depend on what amount you put for your closing stock balance on last years tax return. If you put $0 and you now have over $5000 then you will need to do one.

[retrogeekaustralia]

Thanks guys, looking back at my last tax return i left that field blank, i would have had less than $5000 worth of stock so i think i must have thought i didn't have to do it.

So I guess all i have to do i state my opening stock as $0 and closing stock as the total value to fix this up.

I don't have huge range of stock so it won't take long at all to work out the value. Im not even certain it would be above $5000. If it does work out lower than $5000 then does that mean i i can just leave it at $0 or would i better of just declaring the stock value to make it easier on my future tax returns?

[rusty-shed]

Hi, My understanding is if you are running a business ( over $20,000 last year turnover, Ebay reports your activities to the Australian Tax office ) you are required to lodge a tax return including a stocktake of all stock on hand at June 30th. The $20,000 figure is not a finite level as if you are buying and selling items in a business like manner to achieve a profit, you can still be deemed to be running a business, regardless of turnover. On my main Ebay account I scroll to the bottom of listed items pages, add up total value for all listed items ( around 1600 listings ) and divide by average mark up percent to arrive at stock value. I add an estimate for unlisted items in storage and use this figure for tax purposes. If your business is growing it is important to start this process, as growing stock value is considered profit for tax purposes. If you ignore this for a few years you may end up with a nasty tax obligation a couple of years down the track. I run several businesses both online and regular B&M, so have a reasonable idea of tax obligations. If you lodge a tax return for Ebay sales I would encourage you to list stock on hand at June 30. Hope this helps.

[wishuponastarcelebrationsandgifts]

Hi scenic, As you have stated your opening stock was $0 and your closing stock is well over $5,000 you will need to do a stocktake.

To simplify things for small business' the ATO no longer require you to do a stocktake if your closing stock figure has varied by less than $5,000, but once it exceeds that amount, as in your case you will need to do one.

The significance of doing a stock take is not only to determine the value of your stock, but to generally work out the cost of goods sold ie. how much the stock you sold thoughout the year cost you. For those that can't determine this figure easily from their accounting system, it can be calculated as follows:

Cost of Goods Sold = Opening Stock + Purchases - Closing Stock

If for example you claimed to have stock valued at $0 at the start of the year, the assumption would be that you sold everything you had on hand last year and therefore claimed all of your stock purchases as an expense. As such you can't claim those purchases as an expense again this year or in future years.

When you purchase stock it remains as an asset until such time you sell the item. As soon as an item of stock is sold it becomes an expense (cost of goods sold).