How we calculate benchmark ratios

On this page

• Tax return – benchmark ratio calculations
• Activity statement – benchmark ratio calculations

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

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

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

Not all benchmark ratios apply to every business. You should refer to the performance benchmark specific to your business.

Tax return – benchmark ratio calculations

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

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

(amount at the relevant labels ÷ turnover) × 100 = benchmark ratio %

There are 5 tax return benchmark ratios:

• Total expenses/turnover
• Cost of sales/turnover
• Labour/turnover
• Rent expenses/turnover – not relevant for all industries
• Motor vehicle expenses/turnover – not relevant for all industries

Turnover

We use turnover to calculate the 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 tax return.

The Other sales of goods and services labels vary according to the type of tax return.

If the amount reported in these labels is blank, zero, or less than 50% of the amount at the total business income label, we use the total business income amount instead.

If the amount in the Total business income label is zero, blank or incomplete, we calculate the total business income as the sum of the following labels for the relevant entity type.

Total expenses/turnover

For this ratio we divide the total expenses amount by the turnover amount.

Total expenses amount is calculated as total expenses minus the payments to associated persons.

If the amount reported at the Total expenses label is zero, blank or incomplete, then we calculate the total expenses amount as the sum of the following labels for the relevant entity type.

Cost of sales/turnover

For this ratio, we divide the cost of sales amount by the turnover amount.

The cost of sales amount excludes salary and wages.

When the Total salary and wages expenses code equals C – meaning that the total salary and wages expenses are included in the cost of sales figure – we deduct the Total salary and wages expenses from the Cost of sales.

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

Cost of sales labels by tax return type

To identify if total salary and wages are included in cost of sales, we use the codes below based on the tax return type.

For total salary and wages expenses, we use the amount reported at the labels below based on the tax return type.

Labour/turnover

For this ratio, we divide the labour amount by the turnover amount.

The labour amount is calculated as follows:

Total salary and wages expenses + Contractor subcontractor and commissions expenses − Payments to associated persons

If the amount reported at label W1 (total salary, wages and other payments) on the activity statement is greater than the total salary and wages expenses reported on the tax return, then we use the activity statement amount in the calculation.

Rent expenses/turnover

Not all businesses have rent expenses.

For this ratio, we divide the rent expenses amount by the turnover amount.

Motor vehicle expenses/turnover

Not all businesses have motor vehicle expenses.

For this ratio, we divide the motor vehicle expenses amount by the turnover amount.

Activity statement – benchmark ratio calculations

From 1 July 2017, Simpler BAS reduced GST reporting for small businesses with a GST turnover of less than $10 million. Therefore, activity statement benchmark ratios will not be available for 2017–18 or later years.

The information in this section is only relevant for 2016–17 and earlier financial years.

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 your performance against the benchmarks, you should use your activity statements for the complete financial year.

The formula to calculate the activity statement benchmark ratios is:

(amount at the relevant labels ÷ total sales) × 100 = benchmark ratio %

There are 2 activity statement benchmark ratios:

• Non-capital purchases/total sales
• GST-free sales/total sales

Total sales

We use the total sales amount, including GST, to calculate the activity statement benchmark ratios. This is label G1 total sales.

Before using the data in our calculation, we check the status of the GST-inclusive indicator 'Does the amount shown at label G1 include GST? (indicate with X)'.

If the ‘GST Included’ indicator is marked as ‘Yes’ we use the amount shown at label G1 total sales in our calculation.

If the indicator is marked 'No' we use the sum of label G1 Total sales and label 1A GST on sales.

Working out whether GST has been included

If the GST-inclusive indicator is blank, we use the formula below to determine if it should be set to ‘Yes’ or ‘No’:

((G1 Total sales + G7 Sales adjustments) − (G2 Export sales + G3 GST-free sales + G4 Input taxed sales)) ÷ 11

If this result is equal to label 1A GST on sales then the GST-inclusive indicator is set to ‘Yes’.

If it isn't, we do a similar calculation but divide by 10:

(G1 + G7) − (G2 + G3 + G4) ÷ 10

If this result is equal to label 1A GST on sales then the GST-inclusive indicator is set to ‘No’.

We also do these calculations if businesses have been inconsistent in their reporting of the GST-inclusive indicator throughout the financial year.

Non-capital purchases/total sales

To calculate this ratio, we divide the label G11 Non-capital purchases amount by the total sales amount.

GST-free sales/total sales

To calculate this ratio, we divide the label G3 GST-free sales amount by the total sales amount.

Where label G3 GST-free sales is zero, we calculate the figure by multiplying the label 1A GST on sales by 11 and then subtracting this amount from the G1 total sales amount.