The basic formula is benchmark figure ÷ turnover × 100 = benchmark percentage.
To calculate cost of sales to turnover as the key benchmark range, divide cost of sales by turnover and multiply by 100:
If you notice you've made a mistake as you compare your business performance, you should make a voluntary disclosure (if necessary).
Example: 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% − 41%
|
34% − 40%
|
32% − 37%
|
Average cost of sales
|
38%
|
37%
|
35%
|
Total expenses / turnover
|
77% − 87%
|
84% − 92%
|
87% − 93%
|
Average total expenses
|
82%
|
88%
|
90%
|
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
- 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