Margin Calculator
Enter any two values above to calculate the rest.
What Is Gross Margin?
Gross margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS). It is the primary profitability measure used by Australian accountants, bookkeepers, and the ATO's benchmark data for small businesses.
Formula: Gross Margin % = (Revenue − Cost) ÷ Revenue × 100
Example: An Australian café buys coffee beans and supplies for A$3.50 per cup and sells flat whites for A$6.50. Gross margin = (A$6.50 − A$3.50) ÷ A$6.50 × 100 = 46.2%.
Gross Margin and GST — An Important Australian Distinction
Most Australian businesses registered for GST charge 10% GST on their sales. GST collected belongs to the ATO — it is not your revenue. If you calculate gross margin on a GST-inclusive price, you will significantly overstate your profitability.
Example: You sell a product for A$110 incl. GST. Your ex-GST revenue is A$100. Cost is A$45. Correct gross margin = (A$100 − A$45) ÷ A$100 = 55%. Calculating on A$110 gives 59.1% — a dangerous overstatement.
Toggle the GST mode in the calculator above to strip GST automatically before calculating margin.
Gross Margin vs Markup
Australian business owners — especially in retail and hospitality — commonly mix up markup and gross margin. They measure the same profit in different ways.
| Metric | Formula | Example (cost A$45, sell A$100) |
|---|---|---|
| Gross Margin | (Revenue − Cost) ÷ Revenue | 55% |
| Markup | (Revenue − Cost) ÷ Cost | 122.2% |
A 100% markup only gives you a 50% gross margin. The ATO's small business benchmarks report gross margin — make sure you're comparing apples with apples.
ATO Small Business Benchmarks
The ATO publishes gross margin benchmarks by industry to help businesses compare their performance and for the ATO to identify under-reported income. If your gross margin is significantly below the ATO benchmark for your industry, it may trigger a review.
| Industry | ATO Benchmark Gross Margin |
|---|---|
| Cafés and restaurants | 60–75% |
| Hairdressing and beauty | 50–65% |
| Retail — clothing | 50–65% |
| Retail — food | 20–35% |
| Building and construction | 25–40% |
| Professional services | 55–75% |
Step-by-Step: Setting a Price with a Target Margin
- Determine your landed cost — e.g. A$30 per unit (product + freight + import duty).
- Set your target gross margin — e.g. 60%.
- Calculate ex-GST selling price: A$30 ÷ (1 − 0.60) = A$75 ex-GST.
- Add 10% GST for the consumer price: A$75 × 1.10 = A$82.50 incl. GST.
- Confirm: gross margin on ex-GST price = (A$75 − A$30) ÷ A$75 = 60% ✓
Frequently Asked Questions
What is a good gross margin for an Australian small business?
Compare against ATO benchmarks for your industry. If you are below benchmark, investigate whether your pricing, cost of goods, or stock losses (shrinkage) are the cause. A gross margin too thin to cover rent, wages, super contributions, and overheads means your business is trading at a loss.
Does GST affect my gross margin?
Yes — always calculate margin on ex-GST prices. GST collected is a liability owed to the ATO, not income. Use the GST toggle in this calculator to strip it automatically.
How do I calculate margin in a spreadsheet?
Revenue in A1, cost in B1. In C1: =(A1-B1)/A1 formatted as a percentage. For ex-GST: =A1/1.1 first, then calculate margin on that figure.
What is the difference between gross margin and net margin?
Gross margin deducts only direct costs (COGS). Net margin deducts everything — wages, rent, insurance, accounting fees, super, loan interest, and income tax. Net margin is your true bottom line.
How does margin relate to superannuation costs?
Superannuation (currently 11.5% of ordinary time earnings) is a fixed employment cost that must be covered by your gross margin. When modelling profitability, factor super into your overhead calculation, not your COGS — it sits below the gross margin line.
This calculator is completely free and requires no account or signup. Accurate financial tools should be available to every Australian business owner, not locked behind a subscription.