Business basics

Trading stock (and the $5,000 stocktake shortcut)

The goods you hold to sell — and when you can skip the stocktake.

Trading stock is anything you hold to sell or use up in producing what you sell: goods on the shelf, raw materials, work in progress. Normally you value it at the start and end of each year so the change flows into your cost of goods sold. If your aggregated turnover is under $50 million and you reasonably estimate the change across the year is $5,000 or less, you can choose not to do a formal stocktake.

That shortcut is why a lot of smaller businesses never do a stocktake at all. If your stock level is broadly the same each June as it was the previous July, the change is small, the concession applies, and your purchases for the year are effectively your cost of goods sold. You still need to be able to show the estimate was reasonable, so a rough count and a note is worth keeping.

Worked example

You estimate $3,200 of stock at the start of the year and about $4,900 at the end. The change is $1,700 — under $5,000 — so you can choose not to account for it, and your $34,000 of purchases stands as your cost of goods sold.

Common mistake

Assuming the concession applies without checking the size of the change. It is the movement that has to be $5,000 or less, not the stock itself — a business holding $40,000 of stock still qualifies if the level barely moved.

Grounded in ATO guidance. Figures last checked . General information, not tax advice.

Related terms

Cost of goods sold (COGS)

What the things you actually sold cost you to make or buy.

Taxable income

Assessable income minus deductions — what tax is actually on.

Sole trader

The simplest business structure — you and the business are one.

ABN (Australian Business Number)

The 11-digit number that identifies your business.

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