Calculate gross profit margin, markup percentage, and selling price for Australian businesses. Includes GST-inclusive pricing.
| Metric | Value |
|---|
Margin and markup are both ways of expressing profitability, but they use different denominators and produce different percentages from the same transaction. Confusing them causes systematic pricing errors that can cost thousands of dollars per month in a volume business.
| Cost | Selling Price (ex-GST) | Gross Profit | Gross Margin | Markup |
|---|---|---|---|---|
| $50 | $75 | $25 | 33.3% | 50% |
| $100 | $150 | $50 | 33.3% | 50% |
| $200 | $333 | $133 | 40% | 66.5% |
| $1,000 | $1,667 | $667 | 40% | 66.7% |
If you know your cost and want to achieve a specific gross margin, use this formula:
Common mistake: multiplying cost × (1 + target margin) instead. $60 × 1.40 = $84 — this gives a 40% markup, which is only a 28.6% margin. The two formulas give very different answers.
| Industry | Typical Gross Margin | Net Margin (after costs) |
|---|---|---|
| Software / SaaS | 70–90% | 15–30% |
| Professional services | 60–80% | 15–25% |
| Food and beverage (hospitality) | 60–75% | 3–9% |
| Retail (general) | 30–50% | 3–8% |
| Construction / building | 15–30% | 2–8% |
| Wholesale distribution | 10–20% | 2–5% |
What is the difference between profit margin and markup?
Margin = gross profit ÷ selling price × 100. Markup = gross profit ÷ cost price × 100. On a $60 cost item sold for $100: gross profit is $40. Markup = $40/$60 = 66.7%. Margin = $40/$100 = 40%. They express the same profitability but using different denominators — they are never the same number unless there is zero profit.
What is a good profit margin in Australia?
It varies enormously by industry. Software and professional services can achieve 60-80% gross margins. Retail typically achieves 30-50% gross margin. Hospitality achieves 60-75% gross but thin net margins after staff and overhead costs. Always track both gross margin (revenue minus direct costs) and net margin (after all operating expenses).
How do I calculate GST on my margin calculations?
Always calculate margins on GST-exclusive prices. GST collected belongs to the ATO — it is not your revenue. A $110 sale (including $10 GST) has revenue of $100 for margin purposes. Including GST in revenue calculations overstates your turnover and distorts margin percentages.