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Valuation of cost of trading stock converted from non‑trade or capital asset

Income Tax Act 1947

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—(1) Where, at any time on or after 16 November 2021, any property of a person that is not trading stock becomes wholly or in part trading stock of the person’s trade or business, then, in computing the gains or profits arising from the sale or disposal of such trading stock, the open market value of the property or part of the property as at the date it becomes trading stock is treated as the cost of the trading stock.(2) For the purpose of subsection (1), property is treated as having become trading stock if the property is held for sale or disposal in the ordinary course of a trade or business.(3) To avoid doubt, the reference to trading stock in subsection (1) does not include property the sale or disposal of which results in a gain or loss that is capital in nature.(4) Where property has become wholly or in part trading stock under subsection (1), then the person must, at the time of lodgment of the person’s return of income for the year of assessment relating to the basis period in which the property becomes trading stock, or such later time as the Comptroller may allow, give notice of the occurrence and specify the particulars of the occurrence in such form and manner as the Comptroller may specify.(5) The Minister may by rules made under section 7, exempt any person or class of persons from subsection (4), subject to such conditions as may be specified in the rules.(6) Rules made for the purposes of subsection (5) may be made to take effect from (and including) 16 November 2021.(7) In this section —“open market value”, in relation to any property, means —(a)the amount that would be realised if the property had been sold in the open market; or(b)where the Comptroller is satisfied by reason of the special nature of the property that it is not practicable to determine the amount mentioned in paragraph (a), such other value as appears to the Comptroller to be reasonable in the circumstances;“trading stock”, in relation to a trade or business —(a)means property of any description (whether movable or immovable) —(i)that is sold in the ordinary course of trade or business; or(ii)that would be so sold if it were mature or if its manufacture, preparation or construction were complete; but(b)does not include any material used in the manufacture, preparation or construction of any property mentioned in paragraph (a).

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