Taxpayers that carry on trading businesses (eg manufacturers, wholesalers and retailers) buy and sell ‘trading stock’. As trading stock is a ‘revenue asset’, buying and selling trading stock is dealt with under the ordinary income (s 6-5 ITAA97) and general deduction (s 8-1 ITAA97) provisions. In other words, subject to the GST reconciliation rules, the proceeds from selling trading stock is assessable under s 6-5 and the cost of purchasing trading stock is deductible under s 8-1.
This chapter examines the meaning of ‘trading stock’ and the general treatment of trading stock under ss 6-5 and 8-1. It also discusses the operation of the special provisions in div 70 ITAA97 that deal with accounting and valuing trading stock.
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