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Income Tax Act 2007

Timing and quantifying rules - Valuation of trading stock (including dealer’s livestock)

EB 2: Meaning of trading stock

You could also call this:

“What counts as goods for sale in your business”

Trading stock is property that you own or have in your business to sell or exchange as part of your normal business activities.

Trading stock also includes work that’s not finished yet, like partly done work or work in progress, that would be trading stock when it’s done. It also includes materials you have to make trading stock.

If you’ve spent money on property that would be trading stock if you had it, that’s also considered trading stock. This includes property leased under a hire purchase agreement when it’s treated as if the person leasing it out (the lessor) bought it, and it’s part of their business assets.

Some things are not trading stock. These include land, property that loses value over time (depreciable property), financial arrangements, certain financial arrangements held by life insurers or people who get income from selling investment shares, livestock not used in a dealing business, things used up when making trading stock (like cleaning supplies), spare parts not for sale or exchange, emissions units, and greenhouse gas units that are not emissions units.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514284.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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EB 1: When this subpart applies, or

“This subpart applies to businesses with trading stock”

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EB 3: Valuation of trading stock, or

“How to work out the value of your business's trading stock each year”

Part E Timing and quantifying rules
Valuation of trading stock (including dealer’s livestock)

EB 2Meaning of trading stock

  1. Trading stock means property that a person who owns or carries on a business has for the purpose of selling or exchanging in the ordinary course of the business.

  2. Trading stock includes—

  3. work of the following kinds that would be trading stock under subsection (1) if it were completed:
    1. partly completed work:
      1. work in progress:
      2. materials that the person has for use in producing trading stock:
        1. property on which the person has incurred expenditure, when the property would, if they had it, be trading stock under subsection (1) or paragraph (a) or (b):
          1. property leased under a hire purchase agreement when the property—
            1. is treated as having been acquired by the lessor under section FA 15 (Treatment when agreement ends: seller acquiring property); and
              1. is an asset of a business that the lessor carries on.

              2. Trading stock does not include—

              3. land:
                1. depreciable property:
                  1. a financial arrangement to which the financial arrangements rules or the old financial arrangements rules apply:
                    1. an excepted financial arrangement that a life insurer has:
                      1. an excepted financial arrangement held by a person if section CX 55 (Proceeds from disposal of investment shares) applies to the income of the person from a disposal of the excepted financial arrangement:
                        1. livestock not used in a dealing business:
                          1. consumable aids to be used in the process of producing trading stock:
                            1. a spare part not held for sale or exchange:
                              1. an emissions unit:
                                1. a greenhouse gas unit that is not an emissions unit.

                                  Compare
                                  Notes
                                  • Section EB 2(3)(e): amended, on , by section 112(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                  • Section EB 2(3)(h): amended, on , by section 72(1) of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
                                  • Section EB 2(3)(i): substituted (with effect on 1 January 2009), on , by section 112(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                  • Section EB 2(3)(j): replaced, on , by section 280 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
                                  • Section EB 2 list of defined terms emissions unit: inserted (with effect on 1 January 2009), on , by section 112(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                  • Section EB 2 list of defined terms ETS unit: repealed (with effect on 1 January 2009), on , by section 112(3)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                  • Section EB 2 list of defined terms greenhouse gas unit: inserted, on , by section 280 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
                                  • Section EB 2 list of defined terms non-Kyoto greenhouse gas unit: repealed, on , by section 280 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).