To calculate the key benchmark cost of sales to turnover, divide the cost of your sales by your turnover and multiply by 100.
Example
This year the cost of sales for Steff's business was $137,983 while her turnover was $456,790.
She would calculate the cost of sales/turnover benchmark percentage as:
cost of sales ÷ turnover × 100
$137,983 ÷ $456,790 = 0.30207
0.30207 × 100 = 30.21%
End of exampleExample: Calculating income tax benchmark ranges
Elizabeth operates a coffee shop. She enters the following figures on her tax return.
Total business income
|
$705,200
|
Cost of sales
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$253,300
|
Salary, wages and superannuation
|
$189,400
|
Payments to associated parties
(This is Elizabeth's wages and superannuation)
|
$50,000
|
Rent
|
$85,800
|
Other expenses
|
$97,000
|
Coffee shops benchmark
The key benchmark range for coffee shops is cost of sales to turnover.
Tax return
Key benchmark range
|
Annual turnover range
|
$65,000 – $250,000
|
$250,001 – $600,000
|
More than $600,000
|
Cost of sales / turnover
|
35% − 41%
|
34% − 40%
|
32% − 37%
|
Average cost of sales
|
38%
|
37%
|
35%
|
Total expenses / turnover
|
78% − 87%
|
84% − 92%
|
87% − 94%
|
Average total expenses
|
83%
|
88%
|
91%
|
Elizabeth calculates her key benchmark ranges as follows:
1. Calculating cost of sales to turnover
Using her tax return figures, Elizabeth does the following calculations:
Turnover is $705,200
Cost of sales is $253,300
($253,300 ÷ $705,200) = 0.35918
0.35918 × 100 = 35.92%
Elizabeth's turnover of $705,200 places her business in the highest turnover range (more than $600,000) for coffee shops.
Her cost of sales to turnover benchmark figure is 35.92%. This is within the benchmark range of 32% to 37% for coffee shops.
2. Calculating total expenses-to-turnover
'Total expenses' is the total expenses reported on the tax return minus payments to associated parties. In Elizabeth's case her wages and superannuation payment of $50,000 is counted as a payment to an associated party.
Elizabeth does the following calculations:
Turnover is $705,200
Total expenses is $675,500 − $50,000 = $625,500
$625,500 ÷ $705,200 = 0.88698
0.88698 × 100 = 88.70%
Elizabeth's turnover of $705,200 places her business in the highest turnover range for coffee shops.
Her total expenses to turnover benchmark figure is 88.70%. This is within the benchmark range of 87% to 94% for coffee shops.
Result
Based on her calculations, Elizabeth is satisfied that her record keeping and business practices are in good order.
End of example