The ATO has issued a reminder to sole traders and partners in a partnership.

If you take goods from your business for your private use, make sure you accurately record this in your stock on hand.

Accessing your trading stock for private use is permissible from a tax perspective, however you need to account for the stock correctly:

  • each time you use it (as you would if you sold it)
  • at year’s end.

By way of background, trading stock is anything your business acquires, produces or manufactures, for the purpose of manufacturing, selling or exchanging. Livestock is also trading stock. Trading stock does not include:

  • standing or growing crops, timber or fruit – these only become trading stock when they are harvested, felled or picked
  • stocks of spare parts held for repairs or maintenance to plant and equipment
  • goods owned by a lending business where the goods are used to earn income by hire or rental, rather than manufacture, sale or exchange, for example furniture, DVDs, catering equipment, tools, vehicles etc.
  • consumables used in manufacturing trading stock, such as cleaning agents or sandpaper.

If you don’t adjust the actual cost of goods sold to reflect the goods you used for private consumption, you could be incorrectly claiming expenses you’re not entitled to.

A good plan is to set up regular reconciliation processes to help you keep track of each time you take stock for private use. Keep a record which shows:

  • the date
  • a description of what was taken
  • the reason stock was taken
  • the cost or market value of the item (excluding GST).

At the end of the financial year, any goods taken for your own use should not be accounted for as stock on hand.



ATO Example

John runs a grocery store. At the end of each week, he takes food from his grocery store for his wife and three children.

John records the value of these goods and reports the amount as income in his business accounts. His records include:

·         the date

·         a description of what was taken

·         the reason stock was taken

·         the cost or market value of the item (excluding GST).

There are two ways you can value your stock. You can either:

  • keep records of the actual value of goods you take from your trading stock for your own private use and report that amount, or
  • use the amounts we provide as estimates of the value of goods you have taken (updated annually), which are available in our taxation determination.

We can help you set up systems to account for your trading stock.