The basic formula is benchmark figure ÷ turnover × 100 = benchmark percentage.

Next step:

## The benchmark formula

### Cost of sales to turnover

To calculate cost of sales to turnover as the key benchmark range, divide cost of sales by turnover and multiply by 100:

• Cost of sales ÷ turnover × 100.

Example: Benchmark formula

Cost of sales = \$137,983

Turnover = \$456,790

Using formula: Cost of sales ÷ turnover × 100:

\$137,983 ÷ \$456,790 = 0.30207

× 100 = 30.21%

End of example

### Examples

The following examples demonstrate how to:

• confirm that you are performing within the benchmark range
• clarify what it may mean if your business is outside a benchmark range.

If you notice you've made a mistake as you compare your business performance, you should make a voluntary disclosure (if necessary).

Definitions of terms you will come across:

• Associated parties – people and entities closely associated with you, such as relatives, partners in a partnership, directors of companies or closely connected companies or trusts.
• Cost of sales (excludes labour) – the cost of anything produced, manufactured, acquired or purchased, for either
• manufacture
• sale or exchange in deriving the gross proceeds

• Labour – salary and wage payments, including contractor payments (amounts exclude GST), it does not include payments to associated parties for example, labour provided by a business owner or business partner.

Example 1: Calculating income tax benchmark ranges

Elizabeth operates a coffee shop.

Elizabeth's tax return figures

 Total business income \$705,200 Cost of sales \$253,300 Salary, wages and superannuation \$189,400 Payments to associated parties (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% − 42%

34% − 40%

32% − 37%

Average cost of sales

38%

37%

35%

Total expenses/turnover

78% − 88%

84% − 92%

88% − 93%

Average total expenses

83%

88%

91%

Activity statement

Key benchmark range

Annual turnover range

\$65,000 – \$250,000

\$250,001 – \$600,000

More than \$600,000

Non-capital purchases/
total sales

58% − 69%

55% − 65%

51% − 60%

Elizabeth calculates her key benchmark ranges using the following calculation methods:

Calculating cost of sales to turnover

Using her tax return figures, Elizabeth does the following calculations:

Turnover = \$705,200

Cost of sales = \$253,300

\$253,300 ÷ \$705,200 = 0.35918

× 100 = 35.92%

Elizabeth's turnover of \$705,200 places her business in the highest turnover range for coffee shops.

Her cost of sales to turnover benchmark range is 35.92%, which is within the benchmark range of 32% to 37% for coffee shops.

Calculating total expenses-to-turnover

Using her tax return figures, Elizabeth does the following calculations:

Turnover = \$705,200

Total expenses \$675,500 − \$50,000 = \$625,500

Total expenses is the total expenses reported on the tax return, minus payments to associated parties

Calculation

Total expenses = \$625,500

Turnover = \$705,200

\$625,500 ÷ \$705,200 = 0.88698

Total expenses to turnover benchmark range × 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 range is 88.70%, which is within the benchmark range of 88% to 93% 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

Example 2: Calculating activity statement benchmark ranges

Sam operates a fruit and vegetable retail business. To calculate his benchmark ranges, he gathers all of his activity statements for the financial year and adds all the figures together to get the annual amounts.

Sam's activity statement figures for the financial year

 Total sales G1 \$655,000 Non-capital purchases G11 \$510,900 GST on purchases 1B \$9,289 GST-free sales G3 \$565,523 GST on sales 1A \$8,134 Total salary and wages W1 \$44,156 Turnover (excludes GST) \$646,866

Fruit and vegetable retailing benchmark

The activity statement key benchmark ranges for fruit and vegetable retailers are non-capital purchases to total sales and GST-free sales to total sales.

Tax return

Key benchmark range

Annual turnover range

\$65,000 – \$450,000

\$450,001 – \$1,100,000

More than \$1,100,000

Cost of sales / turnover

60% − 69%

66% − 73%

70% − 76%

Average cost of sales

64%

69%

73%

Total expenses/turnover

80% − 89%

89% − 93%

93% − 96%

Average total expenses

84%

91%

94%

Activity statement

Key benchmark range

Annual turnover range

\$65,000 – \$450,000

\$450,001 – \$1,100,000

More than \$1,100,000

Non-capital purchases / total sales

71% − 84%

74% − 85%

79% − 85%

GST-free sales / total sales

58% − 87%

72% − 92%

80% − 94%

Sam calculates his activity statement benchmark ranges using the following calculation methods:

Calculating non-capital purchases to total sales

Using his annual activity statement figures, Sam does the following calculations:
Total sales G1 = \$655,000
Non-capital purchases G11 = \$510,900

Calculation

Non-capital purchases = \$510,900
Total sales = \$655,000
Non-capital purchases divided by total sales benchmark range

\$510,900 ÷ \$655,000 = 0.78

× 100 = 78%

Sam's turnover of \$646,866 places his business in the medium turnover range for fruit and vegetable retailing.

His non-capital purchases to total sales benchmark range is 78%, which is within the benchmark range of 74% to 85% for fruit and vegetable retailing.

Calculating GST-free sales to total sales

Using his activity statement figures, Sam does the following calculations:
Total sales G1 = \$655,000
GST-free sales G3 = \$565,523

Calculation

GST-free sales = \$565,523

Total sales = \$655,000

\$565,523 ÷ \$655,000 = 0.86339

× 100 = 86.34%

Results

Sam's turnover of \$646,866 places his business in the medium turnover range for fruit and vegetable retailing.

His GST-free sales to total sales benchmark range is 86.34%, which is within the benchmark range of 72% to 92% for fruit and vegetable retailing.

End of example