For our small business clients which hold inventory, a common question we are asked is; (i) do I need to conduct a stocktake and if, so (ii) how often do I need to conduct a stocktake.
If you are a small business entity you can choose not to conduct a stocktake, as long as the change in value of your trading stock is $5,000 or less between;
However, if the value of your trading stock changes by more than $5000, you must conduct a stocktake.
For tax purposes, you are required to conduct a stocktake at the end of each financial year (if your trading stock value if not less than $5,000). However, it is always good practice to keep track of your inventory by conducting a stocktake at the end of each month. There are various inventory management or stocktake inventory software out in the market which can help you with this.
It’s important to ensure you provide your closing stock values to your accountant so they can record them in your annual tax return as well as in your monthly performance summaries so you can track your business performance effectively.
This Tax Tips Tuesday is brought to you with love by Nudge Accounting. You can read other Tax Tips here.