Overview – 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
- Motor vehicle expenses/turnover
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.
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.
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.
Item | Label |
|---|---|
Other sales of goods and services | 6C |
Gross payments subject to foreign resident withholding (excluding capital gains) | 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 |
Item | Label |
|---|---|
Other business income | 5G + 5H |
Gross payments where ABN not quoted | 5C + 5D |
Gross payments subject to foreign resident withholding (excluding capital gains) | 5B |
Assessable Government industry payments | 5E + 5F |
Item | Label |
|---|---|
Gross payments where Australian business number not quoted | P8C + P8D |
Gross payments subject to foreign resident withholding (excluding capital gains) | P8B |
Gross payments – voluntary agreements | P8E + P8F |
Gross payments – labour hire or other specified payments | P8N + P8O |
Assessable governments industry payments | P8G + P8H |
Other business income | 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.
Tax return type | Label |
|---|---|
Company | 6Q |
Partnership or trust | 5O |
Individual | P8S + P8T |
Tax return type | Label |
|---|---|
Company | 8Q |
Partnership or trust | 45 M |
Individual | P16 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.
Item | Label |
|---|---|
Foreign resident withholding expenses (excluding capital gains) | 6B |
Cost of sales | 6A |
Contractor, sub-contractor and commission expenses | 6C |
Superannuation expenses | 6D |
Bad debts | 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 |
Item | Label |
|---|---|
Foreign resident withholding expenses (excluding capital gains) | 5P |
Contractor, subcontractor and commission expenses | 5C |
Superannuation expenses | 5D |
Cost of sales | 5E |
Bad debts | 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 |
Item | Label |
|---|---|
Cost of sales | P8 K + L − M expenses |
Foreign resident withholding expenses (excluding capital gains) | P8 U |
Contractor, subcontractor and commission expenses | P8 F |
Superannuation expenses | P8 G |
Bad debts | 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 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
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.
Tax return type | Label codes |
|---|---|
Company | 8D code |
Partnership or trust | 44 L code |
Individual | P15 G code |
For total salary and wages expenses, we use the amount reported at the labels below based on the tax return type.
Tax return type | Label |
|---|---|
Company | 8D |
Partnership or trust | 44 L |
Individual | P15 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.
Tax return type | Label |
|---|---|
Company | 8D |
Partnership and Trust | 44 L |
Individual | P15 G |
Tax return type | Label |
|---|---|
Company | 6C |
Partnership or trust | 5C |
Individual | P8 F |
Tax return type | Label |
|---|---|
Company | 8Q |
Partnership or trust | 45 M |
Individual | P16 H |
Rent expenses/turnover
Not all businesses have rent expenses.
For this ratio, we divide the rent expenses amount by the turnover amount.
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.
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 were 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:
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?'.
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.