Hospitality Industry, Bars, Café, Restaurant taxes

Accounting for Stock

Most Small/Medium Enterprise(SME) businesses’ account for stock or inventory on a periodic basis. That is, they do a physical stock-take and record inventory levels and then generally value that stock at cost.

However, at tax-time stock can be valued under 3 different methods which are Cost, Replacement Cost and Market Selling value.

As the value closing stock is included in the calculation of taxable income, sometimes the lower the value, the better the tax result.

Careful consideration of which valuation method to use at years’ end could save thousands of dollars in income tax. If say, you have some stock that is close to its use-by date or obsolete and you just want or get rid of it by heavily discounting it, then the value of your closing stock may decrease.

Goods for Private Use

Unfortunately, the tax office doesn’t let this one get through.

They’re very aware that owners of hospitality venues, butchers, Delis etc. purchase goods and drinks though their business, claim tax deductions for them and then consume them privately, either on the premises or at home.

Normally when purchasing goods from the supermarket, those goods might have GST included in them and are most often bought with after-tax dollars.

So, each year the tax office estimates the value of the amount of food or drink consumed by hospitality business owners etc. and puts a value on that consumption. The value of that food and/or drink consumed by business owners is known as Goods for Own Use and must be declared by the business as GST inclusive income, just as it would if they were sold to the general public.

NBC are Accountants and experts in the field of taxes and business planning for the Hospitality Industry. For further assistance, contact NBC or your usual NBC representative.