Show download pdf controls
  • How benchmark ratios are calculated

    Benchmark ratios are calculated from information reported at specific labels on the income tax returns and activity statements of businesses that operate in similar industries.

    Depending on the entity type, we use the labels from the company, partnership, trust, and individual income tax returns.

    Each ratio has a set of rules for instances where a label is blank or zero – for example, the labels used to determine turnover.

    Not all of the benchmark ratios apply to every business – refer to the performance benchmark specific to your business to determine which one you need to calculate.

    All label examples are from 2011 income tax returns and activity statements.

    Find out about:

    Income tax return – benchmark ratio calculations

    All income tax return benchmark ratios are expressed as a percentage of turnover excluding GST.

    The basic formula to calculate the income tax return benchmark ratio is:

    (figure at the relevant label(s) ÷ turnover) x 100 = benchmark ratio %

    Turnover

    We use turnover to calculate the income tax return benchmark ratios. Turnover is the revenue businesses receive from providing goods or services. This amount excludes GST.

    For turnover, we generally use the amount reported at the other sales of goods and services label on the income tax return.

    The other sales of goods and services labels to determine turnover are:

    Company

    label 6C

    Partnerships and Trusts

    label 5G + 5H

    Individual

    label P8 I + P8 J

    However, if the amount reported in the labels above is blank, zero, or less than 50 percent of the amount reported at the total business income label, then we use the total business income amount.

    The total business income labels used are:

    Company

    label 6S

    Partnerships and Trusts

    label 5
    Total business income primary production plus non-primary production

    Individual

    label P8
    Total business income primary production plus non-primary production

    However, if the total business income amount reported in the labels above is zero, blank, or incomplete, then we calculate the total business income using the labels for the relevant entity type.

    The labels used when calculating the total business income are:

    Companies – the sum total of the following labels

    Other sales of goods and services

    label 6C

    Gross payments subject to foreign resident withholding

    label 6B

    Gross payments where ABN not quoted

    label 6A

    Gross distribution from partnerships

    label 6D

    Gross distribution from trusts

    label 6E

    Forestry managed investment scheme income

    label 6X

    Gross interest

    label 6F

    Gross rent and other leasing and hiring income

    label 6G

    Total dividends

    label 6H

    Fringe benefits employee contributions

    label 6I

    Assessable Government industry payments

    label 6Q

    Unrealised gains on revaluation of assets to fair value

    label 6J

    Other gross income

    label 6R

    Partnerships and Trusts – the sum total of the following labels

    Other business income

    label 5G+5H

    Gross payments where ABN not quoted

    label 5C + 5D

    Gross payments subject to foreign resident withholding

    label 5A + 5B

    Assessable Government industry payments

    label 5E + 5F

    Individuals – the sum total of the following labels

    Gross payments where Australian business number not quoted

    label P8C + P8D

    Gross payments subject to foreign resident withholding

    label P8A + P8B

    Gross payments – voluntary agreements

    label P8E + P8F

    Gross payments – labour hire or other specified payments

    label P8N + P8O

    Assessable governments industry payments

    label P8G + P8H

    Other business income

    label P8I + P8J

    Total expenses/turnover

    To calculate the total expenses to turnover benchmark ratio, we divide the total expenses benchmark figure amount by the turnover figure.

    The total expenses benchmark figure is the total expenses minus the payments to associated persons.

    Total expenses benchmark figure = total expenses – payments to associated persons

    For the total expenses, we generally use the amount reported at the total expenses label on the income tax return.

    The total expenses labels are:

    Company

    label 6Q

    Partnerships and Trusts

    label 5O

    Individual

    label P8S + P8T

    However, when the amount reported at the total expenses label is zero, blank, or incomplete, then we calculate the total expenses amount.

    The labels used when calculating the total expenses in these circumstances are:

    Companies – the sum total of the following labels

    Foreign resident withholding expense

    label 6B

    Cost of sales

    label 6A

    Contractor, sub-contractor and commission expenses

    label 6C

    Superannuation expenses

    label 6D

    Bad debts

    label 6E

    Lease expenses within Australia

    label 6F

    Lease expenses overseas

    label 6I

    Rent expenses

    label 6H

    Interest expenses within Australia

    label 6V

    Interest expenses overseas

    label 6J

    Royalty expenses within Australia

    label 6W

    Royalty expenses overseas

    label 6U

    Depreciation expenses

    label 6X

    Motor vehicle expenses

    label 6Y

    Repairs and maintenance

    label 6Z

    Unrealised losses on revaluation of assets to fair value

    label 6G

    All other expenses

    label 6S

    Partnerships and Trusts – the sum total of the following labels

    Foreign resident withholding expenses

    label 5P

    Contractor, subcontractor and commission expenses

    label 5C

    Superannuation expenses

    label 5D

    Cost of sales

    label 5E

    Bad debts

    label 5F

    Lease expense

    label 5G

    Rent expenses

    label 5H

    Total interest expenses

    label 5I

    Total royalty expenses

    label 5J

    Depreciation expenses

    label 5K

    Motor vehicle expenses

    label 5L

    Repairs and maintenance

    label 5M

    All other expenses

    label 5N

    Individuals – the sum total of the following labels

    Cost of sales

    label P8 K + L – M expenses

    Foreign resident withholding expenses

    label P8 U

    Contractor, subcontractor and commission expenses

    label P8 F

    Superannuation expenses

    label P8 G

    Bad debts

    label P8 I

    Lease expenses

    label P8 J

    Rent expenses

    label P8 K

    Interest expenses within Australia

    label P8 Q

    Interest expenses overseas

    label P8 R

    Depreciation expenses

    label P8 M

    Motor vehicle expenses

    label P8 N

    Repairs and maintenance

    label P8 O

    All other expenses

    label P8 P

    For the payments to associated persons, we use the amount reported at the payments to associated persons label on the income tax return.

    The payments to associated persons labels are:

    Company

    label 8Q

    Partnership and Trust

    label 45 M

    Individual

    label P14 H

    Cost of sales/turnover

    To calculate the cost of sales to turnover benchmark ratio, we divide the cost of sales benchmark figure amount by the turnover figure.

    The cost of sales benchmark figure amount does not include salary and wages.

    When the total salary and wages expenses code equals C (Code C means that total salary and wages expenses are included in the cost of sales figure) then we deduct the total salary and wages expenses from the cost of sales.

    Otherwise, we use the total cost of sales amount reported on income tax return.

    The cost of sales labels are:

    Company

    label 6A

    Partnership and Trust

    label 5E

    Individual

    label P8 K + L – M expenses

    The total salary and wages expenses code labels used to identify if total salary and wages are included in cost of sales are:

    Company

    label 8D code

    Partnership and Trust

    label 44 L code

    Individual

    label P13 G code

    The total salary and wages expenses labels are:

    Company

    label 8D

    Partnership and Trust

    label 44 L

    Individual

    label P13 G

    Labour/turnover

    To calculate the labour to turnover benchmark ratio, we divide the labour benchmark figure amount by the turnover figure.

    For the labour benchmark figure amount we generally use total salary and wages expenses from the income tax return plus contractor, subcontractor and commissions expenses minus payments to associated persons.

    Labour benchmark figure = total salary and wages expenses + contractor subcontractor and commissions expenses – payments to associated persons

    However, if Label W1 (total salary, wages and other payments) on the activity statement is greater than the total salary and wages expenses reported on the income tax return, then we use the W1 (total salary, wages and other payments) amount from the activity statement plus contractor, subcontractor and commission expenses minus payments to associated persons as the labour benchmark figure amount.

    The total salary and wages expenses labels are:

    Company

    label 8D

    Partnership and Trust

    label 44 L

    Individual

    label P13 G

    The contractor, subcontractor and commissions expenses labels are:

    Company

    label 6C

    Partnership and Trust

    label 5C

    Individual

    label P8 F

    The payments to associated persons labels are:

    Company

    label 8Q

    Partnership and Trust

    label 45 M

    Individual

    label P14 H

    Rent expenses/turnover

    To calculate the rent to turnover benchmark ratio, we divide the rent expenses benchmark figure amount by the turnover figure.

    The rent expenses labels are:

    Company

    label 6H

    Partnership and Trust

    label 5H

    Individual

    label P8 K

    Motor vehicle expenses/turnover

    To calculate the motor vehicle expenses to turnover benchmark ratio, we divide the motor vehicle expenses benchmark figure amount by the turnover figure.

    The motor vehicle expenses labels are:

    Company

    label 6Y

    Partnership and Trust

    label 5L

    Individual

    label P8 N

    Activity statement – benchmark ratio calculations

    All activity statement benchmark ratios are expressed as a percentage of total sales including GST from a complete year’s activity statement data.

    The activity statement benchmark ratios are developed using a complete financial year's activity statement data. To compare the performance against the benchmarks, you should use the activity statements for the entire financial year.

    The basic formula to calculate the activity statement benchmark ratio is:

    (figure at the relevant label(s) ÷ total sales) x 100 = benchmark ratio %

    See also:

    Total sales

    We use the total sales amount in the calculation of the activity statement benchmark ratios.

    The total sales amount includes GST.

    For total sales, we use the G1 label Total sales amount reported on the activity statement.

    However, we check the G1 label Total sales for GST prior to utilising this amount in our calculation of the benchmark ratios.

    Total sales when ‘GST Included’ indicator is marked as ‘Yes’

    When the GST-inclusive indicator “Does the amount shown at label G1 include GST? (indicate with X)” is marked as 'Yes', we use the amount shown at label G1 Total sales.

    Total sales = G1

    Total sales when ‘GST Included’ indicator is marked as ‘No’

    When this GST-inclusive indicator is marked as ‘No’, then we add label G1 Total sales to label 1A GST on sales.

    Total sales = G1 1A

    Total sales when ‘GST Included’ indicator is blank

    We use the formula below to determine if the ‘GST inclusive’ label at G1 indicator should be set to ‘Yes’ or ‘No’. We do this to determine whether we should use the above formulae.

    • To determine if GST inclusive indicator should be set to ‘Yes’

    If the GST-inclusive indicator is blank we take label G1 Total sales, add label G7 Sales adjustments and then subtract labels G2 Export sales, G3 GST-free sales and G4 Input taxed sales. We then divide by 11. If this result is equal to label 1A GST on sales then the GST-inclusive indicator is set to ‘Yes’.

    (G1 + G7) – (G2 + G3 + G4) / 11

    • To determine if GST inclusive indicator should be set to ‘No’

    If the GST-inclusive indicator is blank, we take label G1 Total sales, add label G7 Sales adjustments, and then subtract labels G2 Export sales, G3 GST-free sales and G4 Input taxed sales. We then divide by 10. If this result is equal to label 1A GST on sales, then the GST-inclusive indicator is set to ‘No’.

    (G1 + G7) – (G2 + G3 + G4) / 10

    We also check the G1 Total sales for GST where businesses have reported inconsistently at the GST-inclusive indicator throughout the financial year.

    Non-capital purchases/total sales

    To calculate the non-capital purchases to total sales benchmark ratio, we divide the G11 Non-capital purchases amount by the Total sales amount.

    Non-capital purchases to Total sales = G11 / Total sales

    We use the amount reported at label G11 Non-capital purchases on the activity statement as the non-capital purchases benchmark figure amount.

    GST-free sales/total sales

    To calculate the GST-free sales to total sales benchmark ratio, we divide the calculated GST-free sales benchmark figure amount by the total sales.

    GST-free sales to Total sales = G3 / Total sales

    Where label G3 GST-free sales is zero, we multiply the 1A GST on sales by 11, and then we subtract this amount from the G1 Total sales to calculate the GST-free sales benchmark figure amount.

    See also:

      Last modified: 27 Feb 2019QC 37143