On the cessation of a business, the market value (and not the consideration received) of various items of trading stock used for purposes of the business that are disposed of is included in the assessable income of the transferor.
As a general principle, expenses incurred in respect of a business that has ceased to operate are deductible, if such expenses are sufficiently connected in time to the operation of the business that has ceased. Specifically, expenses recognized as deductible after the cessation of a business include:
- lease payments for business premises; and
- interest payments on loans borrowed for the purposes of the business. However, interest payable on a loan taken after the cessation of the business is not deductible.