Profit Margin and Markup Calculator
Work out your gross margin, markup and selling price from your cost, with or without GST, and see how many sales you need to cover your overheads.
- GST rate10% (registration from $75,000 turnover)
- Checked29 October 2026
| Each month | Amount | % of revenue |
|---|
Prices for other margins on this cost
| Margin | Markup | Price | Profit |
|---|
Margin = profit ÷ price. Markup = profit ÷ cost. Amounts exclude GST unless stated. Net profit is before income tax.
Start from price, target margin or markup and see all three.
Enter prices with or without GST, or as a business that is not registered.
Add monthly sales and overheads to see what you keep.
Download a one-page summary with a margin to markup table.
How the profit margin calculator works
Enter what one unit costs you, excluding GST, then choose what you already know: your selling price, the gross margin you want, or the markup you add to cost. The calculator works out the other two, shows the price your customers pay with GST, and lists the price you would need for a range of other margins on the same cost.
Add how many units you sell a month and your fixed monthly overheads, and it also shows your monthly revenue, gross profit and net profit before tax, plus the number of sales you need to break even. You can download the results as a one-page PDF to keep with your pricing records or share with your accountant.
The formulas
The calculation, step by step
- Start with the GST-exclusive cost. If you are registered for GST, you claim back the GST on most purchases, so it is not a real cost to you.
- Find the GST-exclusive price. Either enter it, or work it out from your target margin or markup. If you entered a GST-inclusive price, the calculator divides it by 1.1.
- Work out the profit per unit. Price minus cost.
- Express it two ways. Divide the profit by the price for margin, and by the cost for markup.
- Scale it up. Multiply by units sold to get revenue and gross profit, then subtract overheads for net profit before tax.
- Find break-even. Divide overheads by the profit on each unit to see how many sales cover your fixed costs.
Margin to markup table
Each row uses a $60 unit cost, the calculator’s default.
| Gross margin | Markup needed | Price (excl. GST) | Profit per unit |
|---|---|---|---|
| 10% | 11.11% | $66.67 | $6.67 |
| 20% | 25.00% | $75.00 | $15.00 |
| 25% | 33.33% | $80.00 | $20.00 |
| 30% | 42.86% | $85.71 | $25.71 |
| 40% | 66.67% | $100.00 | $40.00 |
| 50% | 100.00% | $120.00 | $60.00 |
| 60% | 150.00% | $150.00 | $90.00 |
How it works in plain English
Margin and markup are two ways of describing the same profit. Markup looks up from the cost: “I add 50% to what I pay.” Margin looks down from the price: “33 cents of every dollar I take is profit.” Because the price is always larger than the cost when you make a profit, the margin percentage is always smaller than the markup percentage for the same product.
The confusion between the two is one of the most common pricing mistakes in small business. If your accountant tells you that you need a 40% gross margin to cover your overheads, and you add 40% to your costs, you will end up with a margin of only 28.6%. On $500,000 of sales, that gap is more than $50,000 of gross profit. This calculator lets you start from whichever number you have and see both.
The most common pricing mistake: adding the margin to cost
If you want a 30% margin and you add 30% to your cost, you get a 23.08% margin. If you want 50% and add 50%, you get 33.33%. The gap grows as the target margin rises, because markup and margin are measured against different numbers.
| Target margin | Price if you add it to a $60 cost | Margin you actually get | Correct price | Profit lost per unit |
|---|---|---|---|---|
| 20% | $72.00 | 16.67% | $75.00 | $3.00 |
| 30% | $78.00 | 23.08% | $85.71 | $7.71 |
| 40% | $84.00 | 28.57% | $100.00 | $16.00 |
| 50% | $90.00 | 33.33% | $120.00 | $30.00 |
On a product line that sells 1,000 units a year, the 40% row costs $16,000 of gross profit, all from using the wrong formula. Once you know the margin you need, use the calculator’s “Target gross margin” option and it will give you the correct price.
GST and your margins
For a GST-registered business, GST is not income and it is not a cost. You collect 10% on top of your taxable sales and pay it to the ATO on your business activity statement (BAS), and you generally claim back the GST included in your business purchases as GST credits. That is why margins should always be calculated on GST-exclusive figures.
A common error is to look at the till total, which includes GST, and compare it with supplier invoices that also include GST. The profit looks 10% bigger than it really is, and the business can end up short of cash when the BAS is due. The calculator lets you enter a GST-inclusive shelf price and converts it to the GST-exclusive figure for you.
Some sales are GST-free, such as most basic food, some health and education services, and exports. If you sell GST-free items, enter them as “not registered” in the calculator so no GST is added, even if your business is registered. If you are not registered for GST, you cannot claim GST credits, so your true cost is the GST-inclusive price you pay suppliers. Enter that as your unit cost.
You must register for GST within 21 days of your turnover reaching, or being expected to reach, $75,000 in a 12-month period ($150,000 for non-profits). When you register, decide whether to add 10% to your prices or absorb it. Absorbing it on a $40 product cuts your GST-exclusive price to $36.36, which for Liam in our example would drop his margin from 55% to about 50.5%.
Showing prices to customers
Under the Australian Consumer Law, if you show a part of a price to consumers, you generally must also show the single total price, including GST and any unavoidable fees, at least as prominently. For most retail businesses, the price on the shelf or website should be the GST-inclusive price. Business-to-business price lists often show prices excluding GST, but they should say so clearly.
Your tax invoices must show the GST separately, or state that the total includes GST, for taxable sales over $82.50. Our GST calculator builds an invoice breakdown if you need one.
Gross margin, net margin and contribution margin
Gross margin compares revenue with the direct cost of what you sold. It answers the question “how much does each sale contribute?” Net margin compares revenue with what is left after every expense, including rent, wages, insurance, software, interest and depreciation. It answers “how much of my sales do I actually keep?”
Contribution margin sits in between. It is the price minus all variable costs, including variable costs that are not part of cost of goods sold, such as sales commissions and card fees. In this calculator, if you include those variable costs in your unit cost, the “gross profit per unit” is your contribution margin, and the break-even figure is a true break-even point.
Here is how the three measures look for the calculator’s default example. A $100 sale with a $60 product cost has a 40% gross margin. If a 2% card fee ($2) and a 5% sales commission ($5) also apply to each sale, the contribution per sale falls to $33, a 33% contribution margin. If monthly overheads of $2,000 are spread over 100 sales, each sale carries $20 of overhead, leaving $13, a 13% net margin before tax. The same sale looks very different depending on which margin you measure, so always say which one you mean.
A business needs all three. A strong gross margin with a weak net margin points to high overheads or low sales volume. A weak gross margin usually means prices are too low or costs are too high, and no amount of cutting overheads will fix that on its own.
| Measure | Formula | What it tells you |
|---|---|---|
| Gross margin | (Revenue − Cost of sales) ÷ Revenue | How profitable each sale is |
| Contribution margin | (Revenue − All variable costs) ÷ Revenue | What each sale adds towards overheads |
| Net margin (before tax) | (Revenue − All costs) ÷ Revenue | What the business keeps from its sales before tax |
Break-even: how many sales you need
Your break-even point is the number of sales at which gross profit exactly covers fixed overheads. Below it, you make a loss; above it, every sale adds its full gross profit to your bottom line. The calculator rounds up to the next whole unit, because you cannot sell part of a product.
Break-even is a powerful planning tool. If you are thinking about taking on a new lease that adds $3,000 a month to your overheads, and your profit per unit is $40, you need 75 more sales a month just to pay for it. If you are thinking about lowering prices to win more customers, the break-even point will rise, and you can see by how much before you commit.
To find your break-even revenue rather than units, divide your overheads by your gross margin as a decimal. With $2,000 of overheads and a 40% margin, break-even revenue is $2,000 ÷ 0.40 = $5,000 a month, which is the same as 50 units at $100.
Discounts and price rises: what they really cost
Because discounts come straight out of profit, they have a much bigger effect on margin than on price. The table shows how much extra volume you need, at different starting margins, to make the same gross profit after a discount.
| Discount | 20% margin | 30% margin | 40% margin | 50% margin |
|---|---|---|---|---|
| 5% | +33% | +20% | +14% | +11% |
| 10% | +100% | +50% | +33% | +25% |
| 15% | +300% | +100% | +60% | +43% |
| 20% | Not possible | +200% | +100% | +67% |
The formula is discount ÷ (margin − discount). A business on a 20% margin that offers 20% off is selling at cost, so no amount of extra volume will make up the lost profit.
Price rises work the other way. With a 40% margin, a 10% price rise lifts profit per unit by 25%, so you could lose up to 20% of your sales volume and still make the same gross profit. The formula is increase ÷ (margin + increase). In practice, most customers are less price sensitive than business owners fear, especially for products that are a small part of their spending or that come with good service.
Margins for service businesses and tradies
Service businesses can use the same formulas, but “cost” means the direct cost of delivering the job: the wages or contractor costs for the hours worked, plus materials. For a sole trader, a useful approach is to work out a cost per hour that includes a fair wage for yourself, super, and any direct costs, then apply a target margin to cover overheads and profit.
Tradies often apply a markup to materials and a separate hourly rate for labour. A 20% markup on materials is only a 16.67% margin, which may not cover the cost of picking up, storing and warrantying the materials. Check both parts of your quote: the labour rate against your hourly cost, and the materials markup against the margin you need.
For professional services, margins are often measured as profit as a share of fees. If an employee costs $60 an hour including super and on-costs and is billed at $150 an hour, the gross margin on billed hours is 60%. Because not every paid hour is billable, the margin on all paid hours will be lower. Our hourly rate calculator can help you turn an annual salary into an hourly cost.
Comparing your margins
There is no single “good” profit margin. A supermarket might work on a small margin with very high volume, while a boutique or a software business might need a high margin because it sells fewer units with higher overheads. The most useful comparisons are with your own past results, with similar businesses in your industry, and with the margin your business needs to cover its costs and pay you properly.
The ATO publishes small business benchmarks for many industries, including the ratio of cost of sales to turnover. Cost of sales to turnover is roughly the opposite of gross margin: a cost of sales ratio of 60% suggests a gross margin of about 40%. If your figures are a long way outside the benchmark range for your industry, it may point to a pricing or cost problem, or to errors in your records. Businesses well outside the range may also attract ATO attention, so it is worth understanding why your numbers differ.
Inventory, cost of sales and your profit
For a business that holds stock, cost of goods sold for a period is not just what you bought in that period. It is opening stock plus purchases, minus closing stock. If you buy a lot of stock at the end of the month, your purchases look high but your cost of sales does not change, because the stock is still on the shelf. Working out margins from purchases alone can make a good month look bad and a bad month look good.
Stock that is lost, stolen, damaged or sold at a markdown also reduces your actual margin compared with the margin on your price list. Retailers often track “realised margin” (what they actually made) against “initial margin” (what they priced for). The difference is a useful measure of shrinkage and discounting.
For tax purposes, the ATO lets small businesses with turnover under $10 million use simplified trading stock rules, which mean you may not need to do a stocktake at the end of the year if the value of your stock has changed by $5,000 or less and you can make a reasonable estimate. Your accountant can tell you whether this applies to you.
From profit to tax
The net profit in this calculator is before income tax. How much tax you pay depends on your business structure:
- Sole traders pay tax on business profit at their personal income tax rates, plus the Medicare levy, as part of their individual tax return. Use our sole trader tax calculator to see how much of your profit to set aside.
- Companies pay 25% if they are a base rate entity, with aggregated turnover under $50 million and no more than 80% passive income, or 30% otherwise.
- Partnerships and trusts generally pass their profit to partners or beneficiaries, who pay tax at their own rates.
Profit for tax purposes is not always the same as the profit in this calculator. Some costs, such as equipment and vehicles, are deducted over several years through depreciation, unless an immediate deduction applies. Some costs, such as entertainment, are not deductible at all. A registered tax agent can reconcile your management figures with your tax return.
Five ways to improve your margin
- Review prices regularly. Many small businesses raise prices only when costs force them to. A small, regular price review, for example every July, keeps margins steady.
- Negotiate on cost. Ask suppliers about volume discounts, early payment discounts and freight terms. A 5% saving on cost lifts a 40% margin to 43%.
- Change the sales mix. Promote the products with the best margins and review the ones with the worst. Your average margin depends on what you sell, not just on what you charge.
- Reduce waste and returns. Every damaged, expired or returned item is a cost with no sale. Tracking it is often the quickest win.
- Add value, not discounts. Bundles, warranties, delivery and add-ons can lift the average sale without cutting the price of the core product.
Pricing a new product, step by step
When you launch a new product or service, you rarely have perfect information. A simple, repeatable process helps you land on a price that covers your costs and that you can defend to customers.
- Work out the full unit cost. Start with the supplier price or materials, then add inbound freight, packaging, labels, card and platform fees, and an allowance for breakage or returns. Use GST-exclusive figures if you are registered.
- Decide the margin your business needs. Take your yearly overheads, add the profit you want to make, and divide by your expected yearly sales revenue. If overheads are $60,000, your profit goal is $40,000 and you expect $250,000 of sales, you need a gross margin of about 40%.
- Calculate the cost-based price. Use the “Target gross margin” option to turn that margin into a price.
- Check the market. Compare your price with similar products. If yours is much higher, either your costs are too high, your product needs to offer something more, or you are in the wrong market. If it is much lower, you may be leaving money on the table.
- Set the shelf price. Add GST if you are registered, and round to a sensible retail price. Re-run the calculator with the rounded GST-inclusive price to see the margin you will actually earn.
- Review after three months. Compare actual sales, actual costs and actual margin with your plan, and adjust.
Marketplace, delivery and payment fees
Selling through online marketplaces, food delivery apps and payment platforms is convenient, but the fees come straight out of your margin. A marketplace commission of 10% to 15%, a payment fee of around 1.5% to 2%, and the cost of free shipping can together take a large share of a product’s price. Because these fees are usually a percentage of the selling price, they reduce margin directly, point for point.
To include them in the calculator, add the dollar value of the fees for one sale to your unit cost. For example, if you sell a $50 product (excluding GST) through a platform that charges 12% commission and 2% payment fees, the fees are $7. If the product costs you $20, your true unit cost is $27, and your margin falls from 60% to 46%. If you sell the same product through your own website and in person as well, run the calculator once for each channel. The differences often explain why some channels feel busy but do not add much profit.
Fees charged to you by platforms may include GST. If you are registered, you can usually claim the GST back, so use the GST-exclusive fee in your cost.
Margins and cash flow
A profitable business can still run short of cash. Gross margin tells you how much profit a sale makes; cash flow tells you when the money arrives. If you pay suppliers up front, hold stock for months and give trade customers 30 or 60 days to pay, your cash is tied up long before you see the profit.
GST adds another timing effect. You collect GST when your customers pay you (or when you invoice, if you account on an accrual basis), and you pay it to the ATO when your BAS is due, usually each quarter. Many small businesses keep GST in a separate account so it is not accidentally spent. The same applies to the income tax on your profit: setting aside a share of each month’s net profit avoids a shock at tax time.
When you plan growth, look at margin and cash together. Doubling sales at a 25% margin may need far more cash for stock and receivables than you expect, while raising the margin by a few points can fund growth from your own profits.
Seasonal prices, bundles and multi-buy offers
Many Australian businesses have strong seasonal patterns, such as Christmas, end of financial year, back to school, and summer and winter peaks for tourism and hospitality. Plan seasonal prices with the calculator before the season starts, rather than discounting in a hurry when stock is not moving.
For a bundle, add up the cost of everything in it and enter that as the unit cost, then enter the bundle price. For a multi-buy offer such as “3 for $100”, divide the price by three and compare the margin with your normal single-unit margin. If the bundle or multi-buy margin is close to your normal margin and it lifts the average sale, it is usually a better offer than a straight discount.
Be careful with “was” and “now” prices. The ACCC expects any reference price to be a genuine price at which the product was actually sold for a reasonable period. Inflating the “was” price to make a discount look bigger can mislead consumers and breach the Australian Consumer Law.
A worked example, from cost to shelf price
Here is the calculator’s default example worked through by hand. A product costs $60 excluding GST, and the business wants a 40% gross margin. It is registered for GST, sells 100 units a month and has $2,000 of monthly overheads.
Price: $60 ÷ (1 − 0.40) = $60 ÷ 0.60 = $100 excluding GST.
Check the margin: profit is $100 − $60 = $40, and $40 ÷ $100 = 40%. The markup is $40 ÷ $60 = 66.67%.
Customer price: $100 × 1.1 = $110 including GST. The extra $10 is GST that the business collects and pays to the ATO.
Monthly figures: 100 units bring in $10,000 of revenue excluding GST, with $6,000 of cost of goods sold, for $4,000 of gross profit. After $2,000 of overheads, net profit before tax is $2,000, a 20% net margin.
Break-even: $2,000 ÷ $40 = 50 units a month. The first 50 sales pay the overheads; the next 50 make the profit.
If the business rounded its shelf price to $109.95 including GST, the GST-exclusive price would be $99.95, the profit per unit $39.95, and the margin 39.97%. Rounding down to a retail price point like this barely changes the margin, which is why it is common practice.
When your costs go up
When a supplier raises prices, many small businesses either absorb the increase or add the same dollar amount to their price. Both approaches quietly reduce the margin. To keep the same margin, the price has to rise by the same percentage as the cost, not the same dollar amount.
For example, if a product’s cost rises from $60 to $66, a 10% increase, adding $6 to a $100 price gives $106 and a margin of 37.7%. To keep a 40% margin, the price needs to be $66 ÷ 0.60 = $110, a 10% increase. Over a year of cost increases, the difference between the two approaches can be several percentage points of margin.
You do not have to pass on every increase immediately. Some businesses absorb small increases and review all prices once or twice a year. Whatever you decide, re-run the calculator with your new cost so you know the margin you are actually earning. Our CAGR calculator can help you track how your costs and prices have grown over several years.
When you explain a price rise to customers, keep it simple and honest. Most customers understand that suppliers, rent, wages and energy cost more each year. A short note that prices are reviewed once a year, sent before the change takes effect, usually goes down better than frequent small increases with no explanation.
Reading margin in your own accounts
Most accounting software produces a profit and loss report that shows revenue, cost of sales, gross profit, expenses and net profit. To find your actual gross margin for a period, divide gross profit by revenue. To find your net margin, divide net profit by revenue. Comparing these with the margins from this calculator is one of the quickest ways to spot problems.
If your actual gross margin is well below the margin on your price list, look for the usual causes: discounts, supplier price increases you have not passed on, wastage, theft, stock write-downs, freight costs that are not in your unit cost, or sales of lower-margin products growing faster than the rest. If your gross margin is on target but your net margin is low, the issue is overheads or sales volume.
Make sure your chart of accounts puts direct costs in cost of sales and fixed costs in expenses. If wages for staff who make or deliver your product are recorded as general expenses, your gross margin will look higher than it really is, and your break-even calculations will be wrong.
Questions worth asking your accountant or BAS agent each year include: which costs are we treating as cost of sales, how does our gross margin compare with the ATO benchmarks for our industry, which products or customers are the least profitable, and how much should we set aside each month for GST and income tax.
Glossary of pricing terms
- Unit cost: the direct cost of one product or service, including materials, freight, packaging and variable fees.
- Cost of goods sold (COGS): the total direct cost of the products sold in a period. For businesses with stock, it is opening stock plus purchases minus closing stock.
- Gross profit: revenue minus cost of goods sold.
- Gross margin: gross profit as a percentage of revenue.
- Markup: gross profit as a percentage of cost.
- Keystone pricing: a retail rule of thumb of doubling the cost, which is a 100% markup and a 50% margin.
- Overheads: fixed costs that do not change with each sale, such as rent, salaries, insurance and software.
- Net profit: what is left after all costs. This calculator shows it before income tax.
- Break-even point: the number of sales, or the revenue, at which gross profit exactly covers overheads.
- GST-exclusive and GST-inclusive: a price before and after the 10% GST is added.
How we tested this calculator
| Check | Expected | Calculator |
|---|---|---|
| Cost $60, price $100 | 40% margin, 66.67% markup | 40%, 66.67% |
| Cost $18, target margin 55% | $18 ÷ 0.45 = $40 | $40.00 |
| Cost $250, markup 30% | $325, 23.08% margin | $325.00, 23.08% |
| Price $5.50 incl. GST | $5.00 excl. GST | $5.00 |
| Overheads $2,000, profit $40 per unit | 50 units to break even | 50 |
| Target margin 100% | Not possible | Warning shown |
The calculator works on one product at a time with a single cost and price. It does not account for stock movements, shrinkage, or different GST treatment of individual items in a mixed sale.
Three real Australian examples
All figures come from this calculator’s engine.
Scenario A: Sofia, café owner in Sydney
Sofia sells a regular coffee for $5.50 including GST. The beans, milk, cup and lid cost her $1.20 per coffee excluding GST. She sells about 6,000 coffees a month and her fixed costs for rent, wages, power and insurance come to $18,000 a month (she has kept food out of this example to keep it simple).
| Each month | Amount |
|---|---|
| Coffees sold | 6,000 |
| Price incl. GST | $5.50 |
| Price excl. GST | $5.00 |
| Unit cost (beans, milk, cup, lid) | $1.20 |
| Profit per coffee | $3.80 (76% margin, 316.67% markup) |
| Revenue excl. GST | $30,000 |
| Gross profit | $22,800 |
| Overheads (rent, wages, power) | $18,000 |
| Net profit before tax | $4,800 (16%) |
Result: a 76% gross margin looks generous, but Sofia needs to sell 4,737 coffees a month just to cover her overheads. Every coffee after that adds $3.80 to profit. A 30-cent price rise to $5.80 including GST would lift her profit per cup to about $4.07 and her monthly net profit by around $1,640 at the same volume, which is why small price changes matter so much for high-volume, low-price businesses.
Scenario B: Liam, handmade jewellery maker in Melbourne
Liam sells online and at weekend markets. He is not registered for GST because his turnover is well under $75,000. Each piece costs him $18 in materials, packaging and platform fees, and he wants a 55% gross margin.
| Each month | Amount |
|---|---|
| Pieces sold | 120 |
| Unit cost (materials, packaging, platform fees) | $18.00 |
| Target margin | 55% |
| Price ($18 ÷ 0.45) | $40.00 |
| Profit per piece | $22.00 (122.22% markup) |
| Revenue | $4,800 |
| Gross profit | $2,640 |
| Overheads (market stall, website, ads) | $900 |
| Net profit before tax | $1,740 (36.25%) |
Result: a 55% margin needs a price of $40, which is a 122% markup on his cost. If he had simply “added 55%” he would have charged $27.90 and made only $9.90 a piece. At 120 sales a month, his net profit before tax is $1,740, and he needs 41 sales to cover his $900 of overheads. If his sales grow so that he expects turnover of $75,000 or more in a year, he will need to register for GST and decide whether to raise prices by 10% or absorb part of it.
Scenario C: Hannah, building supplies wholesaler in Brisbane
Hannah buys a product for $250 excluding GST and adds a 30% markup. She sells 200 units a month to trade customers and has $6,000 of monthly overheads for this product line.
| Each month | Amount |
|---|---|
| Units sold | 200 |
| Unit cost | $250.00 |
| Markup | 30% |
| Price excl. GST | $325.00 |
| Price incl. GST | $357.50 |
| Profit per unit | $75.00 (23.08% margin) |
| Revenue excl. GST | $65,000 |
| GST collected for the ATO | $6,500 |
| Gross profit | $15,000 |
| Overheads | $6,000 |
| Net profit before tax | $9,000 (13.85%) |
Result: a 30% markup is only a 23.08% margin. Her trade customers see $357.50 including GST, of which $32.50 is GST that she passes on to the ATO. At 200 units she makes $9,000 a month before tax, and she breaks even at 80 units. Because her margin is thin, a 10% discount to win a large order would cut her profit per unit from $75 to $42.50, so she would need about 76% more volume to make the same gross profit.
Three expert tips for pricing
Tip 1: Price from margin, not markup
Decide the gross margin your business needs to cover overheads and leave a profit, then work back to the price with the formula cost ÷ (1 − margin). It keeps your pricing tied to what the business needs, rather than to a habit of adding a fixed percentage to cost. Review the margin each year against your actual overheads.
Tip 2: Know the true unit cost
Many small businesses understate cost by leaving out freight, packaging, card fees, marketplace commissions, wastage and returns. These can add 5 to 15 percentage points to the cost of a product. Use your actual figures from the last few months, not supplier list prices.
Tip 3: Test discounts before you run them
Before running a sale, use the calculator to see your profit at the discounted price and how many extra sales you need to make the same gross profit. A discount that halves your margin needs double the volume just to stand still. Bundles, add-ons and free delivery thresholds often protect margin better than a straight price cut.
Profit margin FAQs
Definitions and eligibility
Q1. What is the difference between margin and markup?
Both measure the same dollar profit, but against a different base. Margin is profit as a percentage of the selling price; markup is profit as a percentage of the cost. An item that costs $60 and sells for $100 has $40 of profit, which is a 40% margin and a 66.67% markup.
Q2. What is gross profit margin?
Gross profit margin is revenue minus the direct cost of the goods or services sold, divided by revenue. It shows how much of each sales dollar is left to pay overheads and leave a profit. It does not include rent, wages that are not part of cost of sales, or other overheads.
Q3. What is net profit margin?
Net profit margin is the profit left after all expenses, including overheads, divided by revenue. This calculator shows net profit before income tax. A business can have a healthy gross margin and still make a loss if its overheads are too high for its sales volume.
Q4. Who should use a profit margin calculator?
Retailers, cafés, online sellers, tradies quoting materials, wholesalers, manufacturers and service businesses all use it to set prices, check quotes, plan discounts and understand how many sales they need to cover their costs.
Maths and technical rules
Q5. How do I calculate the selling price from a target margin?
Divide the cost by one minus the margin. For a 40% margin on a $60 cost, the price is $60 ÷ (1 − 0.40) = $100. A common mistake is adding 40% to the cost, which gives $84 and only a 28.6% margin.
Q6. How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 50% markup is a 33.33% margin, and a 100% markup is a 50% margin. To go the other way, markup = margin ÷ (1 − margin), so a 25% margin needs a 33.33% markup.
Q7. Can a margin be more than 100%?
No. Margin is profit as a share of the price, so it is always below 100%. Markup has no upper limit: a product that costs $1 and sells for $5 has a 400% markup but an 80% margin.
Q8. How is break-even worked out here?
The calculator divides your monthly overheads by the gross profit on each unit and rounds up. With $2,000 of overheads and $40 profit per unit, you need to sell 50 units a month before you start making a profit.
GST and state differences
Q9. Should margins be worked out with or without GST?
Without GST. If you are registered for GST, the 10% you collect belongs to the ATO and is paid on your BAS, and you usually claim back the GST on your costs. Working out margins on GST-inclusive prices overstates both revenue and profit.
Q10. How does GST affect my price to customers?
If you are registered, add 10% to your GST-exclusive price for taxable sales. A $100 price becomes $110 to the customer. When you advertise to consumers, the Australian Consumer Law generally requires you to show the total price, including GST.
Q11. Do I need to register for GST?
You must register for GST when your GST turnover reaches $75,000 a year, or $150,000 for non-profit organisations. Taxi and ride-sourcing drivers must register regardless of turnover. You can choose to register below the threshold.
Q12. Are profit margins taxed differently in each state?
No. Income tax and GST are federal, so the same rules apply in every state and territory. State taxes such as payroll tax and land tax can affect your overheads, and therefore your net margin, depending on where you operate and how large your business is.
Edge cases and ATO compliance
Q13. What happens if my price is below cost?
The calculator shows a negative profit and warns you. Selling below cost can make sense for a short promotion or to clear old stock, but it cannot be sustained. Check whether your cost figure includes freight, packaging and merchant fees.
Q14. What costs should I include in unit cost?
Include every cost that rises with each sale: the purchase price or materials, inbound freight, packaging, direct labour, payment processing fees and marketplace commissions. Leave out fixed costs such as rent and software, which go in overheads.
Q15. Is my profit what I pay tax on?
Broadly, yes. Your taxable income is your assessable income less allowable deductions. Sole traders pay tax at their personal rates, and companies pay 25% if they are a base rate entity, or 30% otherwise. Some costs, such as capital equipment, are deducted over time rather than all at once.
Q16. How does the ATO use margins?
The ATO publishes small business benchmarks showing typical ratios, such as cost of sales to turnover, for many industries. Businesses well outside the benchmark range for their industry may be more likely to be reviewed, so it is worth knowing where your figures sit.
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Open calculator →Editorial transparency and sources
We check the GST rules on this page against the ATO each year and whenever they change. The margin and markup formulas are standard accounting definitions. The page was last checked on 29 October 2026. Read our editorial policy and report errors on our contact page.
General Advice Warning: this calculator and page provide general information for educational purposes only. They do not take into account your objectives, financial situation or needs and are not financial, accounting or tax advice. Speak to a registered tax agent or BAS agent about your business. AUFinanceCalculators.com does not hold an Australian Financial Services Licence and is not a registered tax or BAS agent. See our full disclaimer.