Simplified Tax System (STS): Disposal of trading stock

Can an STS taxpayer make an election under subsection 70-100(4) of the Income Tax Assessment Act 1997 (ITAA 1997) to treat an item of trading stock as disposed of at closing value?

Yes. Provided the conditions in section 70-100 of the ITAA 1997 are satisfied, an STS taxpayer can make an election under subsection 70-100(4) of the ITAA 1997 to treat their trading stock as disposed of at a closing value, other than market value.

An STS taxpayer disposes of their trading stock outside the ordinary course of business for the purposes of subsection 70-100(1) of the ITAA 1997. They retain an interest in the stock after this disposal. The conditions in subsection 70-100(6) of the ITAA 1997 are satisfied. The STS taxpayer wishes to make an election under subsection 70-100(4) of the ITAA 1997.

When trading stock is transferred from one entity to another, an election is available under subsection 70-100(4) of the ITAA 1997 that allows trading stock to be valued at tax or book value, rather than market value, if certain conditions are met as outlined in subsection 70-100(6) of the ITAA 1997.

There is no specific provision that provides how subsection 70-100(4) of the ITAA 1997 applies to an STS taxpayer. In the absence of any express rule preventing an STS taxpayer from making an election under subsection 70-100(4) of the ITAA 1997, or any evidence of a legislative intent to do so, an STS taxpayer is able to make such an election provided the conditions in section 70-100 of the ITAA 1997 are met.