• ## How we calculate benchmark ratios

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. 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 five tax return benchmark ratios:

#### 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:

Other sales of goods and services label by tax return type

Tax return type

Label

Company

6C

Partnership or trust

5G + 5H

Individual

P8 I + P8 J

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.

Total business income labels by tax return type

Tax return type

Label

Company

6S

Partnership or trust

5 – total business income primary production plus non-primary production

Individual

P8 – total business income primary production plus non-primary production

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.

Companies – labels summed to calculate the total business income

Item

Label

Other sales of goods and services

6C

Gross payments subject to foreign resident withholding

6B

Gross payments where ABN not quoted

6A

Gross distribution from partnerships

6D

Gross distribution from trusts

6E

Forestry managed investment scheme income

6X

Gross interest

6F

Gross rent and other leasing and hiring income

6G

Total dividends

6H

Fringe benefits employee contributions

6I

Assessable Government industry payments

6Q

Unrealised gains on revaluation of assets to fair value

6J

Other gross income

6R

Partnerships and trusts – labels summed to calculate the total business income

Item

Label

5G+5H

Gross payments where ABN not quoted

5C + 5D

Gross payments subject to foreign resident withholding

5A + 5B

Assessable Government industry payments

5E + 5F

Individuals – labels summed to calculate the total business income

Item

Label

Gross payments where Australian business number not quoted

P8C + P8D

Gross payments subject to foreign resident withholding

P8A + P8B

Gross payments – voluntary agreements

P8E + P8F

Gross payments – labour hire or other specified payments

P8N + P8O

Assessable governments industry payments

P8G + P8H

P8I + P8J

#### 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.

Total expenses labels by tax return type

Tax return type

Label

Company

6Q

Partnership or trust

5O

Individual

P8S + P8T

Payments to associated persons labels by tax return type

Tax return type

Label

Company

8Q

Partnership or trust

45 M

Individual

P14 H

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.

Companies – labels summed to calculate the total expenses

Item

Label

Foreign resident withholding expense

6B

Cost of sales

6A

Contractor, sub-contractor and commission expenses

6C

Superannuation expenses

6D

6E

Lease expenses within Australia

6F

Lease expenses overseas

6I

Rent expenses

6H

Interest expenses within Australia

6V

Interest expenses overseas

6J

Royalty expenses within Australia

6W

Royalty expenses overseas

6U

Depreciation expenses

6X

Motor vehicle expenses

6Y

Repairs and maintenance

6Z

Unrealised losses on revaluation of assets to fair value

6G

All other expenses

6S

Partnerships and trusts – labels summed to calculate the total expenses

Item

Label

Foreign resident withholding expenses

5P

Contractor, subcontractor and commission expenses

5C

Superannuation expenses

5D

Cost of sales

5E

5F

Lease expense

5G

Rent expenses

5H

Total interest expenses

5I

Total royalty expenses

5J

Depreciation expenses

5K

Motor vehicle expenses

5L

Repairs and maintenance

5M

All other expenses

5N

Individuals – labels summed to calculate the total expenses

Item

Label

Cost of sales

P8 K + L  M expenses

Foreign resident withholding expenses

P8 U

Contractor, subcontractor and commission expenses

P8 F

Superannuation expenses

P8 G

P8 I

Lease expenses

P8 J

Rent expenses

P8 K

Interest expenses within Australia

P8 Q

Interest expenses overseas

P8 R

Depreciation expenses

P8 M

Motor vehicle expenses

P8 N

Repairs and maintenance

P8 O

All other expenses

P8 P

#### 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.

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

Tax return type

Label

Company

6A

Partnership or trust

5E

Individual

P8 K + L – M expenses

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

Total salary and wages label codes by tax return type

Tax return type

Label

Company

8D code

Partnership or trust

44 L code

Individual

P13 G code

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

Total salary and wages expenses by tax return type

Tax return type

Label

Company

8D

Partnership or trust

44 L

Individual

P13 G

#### 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.

Total salary and wages labels by tax return type

Tax return type

Label

Company

8D

Partnership and Trust

44 L

Individual

P13 G

Contractor, subcontractor and commissions expenses labels by tax return type

Tax return type

Label

Company

6C

Partnership or trust

5C

Individual

P8 F

Payments to associated persons labels by tax return type

Tax return type

Label

Company

8Q

Partnership or trust

45 M

Individual

P14 H

#### Rent expenses/turnover

Not all businesses have rent expenses.

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

Rent expenses by tax return type

Tax return type

Label

Company

6H

Partnership or trust

5H

Individual

P8 K

#### 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.

Motor vehicle expenses by tax return type

Tax return type

Label

Company

6Y

Partnership or trust

5L

Individual

P8 N

### 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 two activity statement benchmark ratios:

#### 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.