Some assets are excluded from the above guidelines, such as horticultural
plants, software or assets rented out or leased to other parties. (For a full
list of what assets are excluded and in what circumstances, refer to the ATO
Guide The Simplifi ed Tax System (Ref NAT 6459) available from tax offi ces
or via the ATO website at
www.ato.gov.au).
Depreciation is a complex matter, even under the STS. If you are in
any doubt about what you can and cannot claim, consult with the
ATO, read their excellent literature or seek professional advice from
a qualifi ed accountant or registered tax agent.
Trading stock
The Simplifi ed Tax System also sets out guidelines to help small businesses
account correctly for trading stock. Trading stock is defi ned by the ATO
guidelines as anything produced, manufactured, acquired or purchased for
manufacture, sale or exchange.
Trading stock does not include the following:
crops which are still growing (these only become stock once they
w
are harvested)
DVDs for hire or rental (for example, those held by a DVD hire business)
w
spare parts held for the repair and maintenance of your own plant and
w
machinery (as distinct from spare parts held for resale)
consumable items used in a manufacturing process (for example,
w
cleaning fl uids or lubricating oils).
Stocktaking
At the end of a trading year a business usually carries out a stocktake
in which it counts up and values all its stock according to one of
three methods:
Cost price – how much the stock has actually cost
w
Market value – the value at which stock can be sold in the current
w
market
Replacement value – the cost to replace an item with an identical
w
item, purchased in the current market.
Businesses are allowed to change the method of valuing stock they
use each year. However, the value they carry forward from the previous
year must be the same as the opening stock value for the current year.
ACCOUNTING FOR NON-ACCOUNTANTS 43
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