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The Income Tax Act 1994 sets out the rules for the valuation of trading stock at balance date.
Trading stock held at balance date for wineries includes stock in the process of fermenting, maturing wines and wines held for sale.
There are simplified rules for "small " taxpayers, those who, together with associates, have an annual turnover of $3 million or less.
Small taxpayers may value their stock at either cost or market value.
In determining the cost of closing stock, small taxpayers that manufacture or produce trading stock are allowed to include a lesser level of costs than other taxpayers. The following costs of production must be included:
Trading stock must be valued using a cost valuation method or, when the market selling value is lower than cost, market selling value can be used.
Cost is determined using generally accepted accounting principles. In this case the requirements of Financial Reporting Standard No 4: Accounting for inventories (FRS-4) are applicable to the extent that they apply to stock that is trading stock for tax purposes.
The costs to be included are the costs that have been incurred in the ordinary course of business to bring the stock to their present condition and location.
As well as including those costs (set out above) that a small taxpayer must include, other taxpayers must also include certain other overhead costs.