How you dispose of your trading stock, and to who, can affect how it is taxed.
Disposing of trading stock at below market value
If you dispose of trading stock at below market value, it's usually taxed as if it was sold (and purchased by the recipient) at market value. This includes stock you take for your own use or sell to an associated person for less than market value.
In some situations, the disposal at a discounted or zero value is not treated as if it was sold at market value. This includes disposals:
- to non-associated persons in the normal course of business, from 1 April 2024 (you must be able to show you have a business reason)
- under a relationship agreement
- to approved donee organisations from 1 April 2024.
Donating trading stock - temporary relief measures ending 31 March 2024
From 17 March 2020 to 31 March 2024, legislation made it easier for businesses to donate trading stock to approved donee organisations (which are mostly registered charities), public authorities and non-associated persons.
Normally if you give your business’s trading stock away, you pay tax as if you'd sold it. But if you donated trading stock in this period, this might not apply. For example, to help people affected by COVID or because of the January or February 2023 weather events.
This temporary relief means that you do not have to return deemed income as if you had sold the stock.
The Orders extending the temporary relief can be found on the New Zealand legislation website.
Tax Administration (Extension of Period of Relief for Certain Disposals of Trading Stock) Order 2023
Tax Administration (Extension of Period of Relief for Certain Disposals of Trading Stock) Order 2022
You can find more information about the temporary relief in the Tax Information Bulletin.
Tax Information Bulletin, Vol 36 No 4 (May 2024): 69 (Tax Technical)
Disposal of business assets that include trading stock
In this situation you will need to know how income tax applies to each kind of asset, including trading stock.
Buying or selling business assets or shares
Excepted financial arrangements
There are rules for excepted financial arrangements that are held as trading stock, for example, shares or emission units.
Tax Policy and Tax Technical information
For more information about disposals of trading stock, see our Tax Policy and Tax Technical websites.