Cabinet makers - ATO benchmarks
Continuing our review of ATO benchmarks, we review the performance benchmark rates for businesses in the cabinet makers industry. Businesses in this industry typically manufacture and install cabinets for kitchens, bathrooms, wardrobes and shop fittings.
What are the benchmarks for cabinet makers?
The key benchmark ratio for this industry is total expenses to turnover. This ratio is likely to be the most accurate predictor of business turnover.
|
Key benchmark ratio |
Annual turnover range |
||
|
$100,000 – $300,000 |
$300,000 – $900,000 |
More than $900,000 |
|
|
Income tax return |
|||
|
Cost of sales/turnover |
35% – 46% |
40% – 49% |
42% – 52% |
|
Average cost of sales |
41% |
44% |
47% |
|
Total expenses/turnover |
64% – 77% |
79% – 88% |
86% – 93% |
|
Average total expenses |
71% |
83% |
89% |
|
Activity statement |
|||
|
Non-capital purchases/total sales |
52% – 66% |
58% – 69% |
58% – 68% |
The following benchmarks can be used as a guide for businesses to review their performance and business practices against other similar businesses.
|
Benchmark ratio |
Annual turnover range |
||
|
Income tax return |
$100,000 – $300,000 |
$300,000 – $900,000 |
More than $900,000 |
|
Labour/turnover |
17% – 27% |
17% – 27% |
23% – 31% |
|
Rent/turnover |
6% – 9% |
4% – 7% |
3% – 5% |
|
Motor vehicle expenses/turnover |
4% – 7% |
2% – 3% |
1% – 2% |
How do I determine whether I am within the benchmark range?
We provide a calculator tool which calculates the following key financial ratios using income tax return data:
• cost of sales/turnover
• total expenses/turnover
• labour cost/turnover
• rent/turnover
• motor vehicle expenses/turnover
and the following ratio based on data included in the activity statement of a business:
• non-capital purchases/total sales.
“The key benchmark ratio for cabinet makers is total expenses to turnover, which is a useful predictor of typical business performance in the industry.”
What it means to be outside the benchmarks
In this case, if you believe your tax affairs are correct you must ensure that you have good records to support your tax return.
If a business does not have evidence to support their return, the ATO may use the benchmarks to determine that the business has been under-reporting income and impose additional tax and penalties.
Reporting above a benchmark range
If your business is reporting above the benchmarks, it means your expenses are high relative to income. This may indicate that:
- you have high wastage
- your competitors may be able to source inputs at lower cost than you
- your volume of sales is too low (for rent and possibly labour)
- your mark-up is lower than your competitors
- you have not recorded all your sales, or
- your internal cash controls may need to be examined.
“If your business report falls outside the ATO’s benchmark ranges, it doesn’t necessarily mean wrongdoing — but you must have good records to support your reported results.”
Reporting below a benchmark range
If your business is reporting below the benchmarks, it means your expenses are low relative to sales. This may indicate that:
- your expenses may be recorded under the wrong label
- some of your expenses may have not been recorded
- your mark-up is higher than your competitors, or
- you have less wastage.
If you have any questions or other enquires, please contact:
Martin van der Saag
Director
T: 02 9984 7774
E: martinv@northadvisory.com.au
Norman Ruan
Accountant
T: 02 9984 7774
E: normanr@northadvisory.com.au
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
ATO benchmarks provide industry-specific financial ratios for cabinet makers.
These include ratios such as total expenses to turnover, cost of sales to turnover, labour to turnover, rent and motor vehicle costs
The key benchmark ratio for this industry is total expenses divided by turnover.
This range helps predict business turnover and assess whether reported figures fit within typical ranges.
Benchmarks vary by turnover bracket.
Smaller and larger cabinet maker businesses have different benchmark ranges — for example, total expenses and cost of sales both shift as turnover grows.
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Frequently Asked Questions
What are ATO benchmarks for cabinet makers?
ATO benchmarks for cabinet makers are industry-specific financial ratios that compare typical cost and expense percentages (such as total expenses, labour and rent relative to turnover) for businesses manufacturing and installing cabinets.
Why does the ATO compare businesses to these benchmarks?
The ATO uses benchmarks to help identify businesses that may be under-reporting income or overstating deductions. Comparing your figures against industry norms helps ensure tax reporting is consistent with peers.
What does it mean if a business falls outside the benchmark range?
Falling outside the benchmarks doesn’t automatically imply non-compliance, but it highlights that your cost or expense ratios are unusual compared with similar businesses and may warrant review or further explanation.
What are typical expense ratios for cabinet makers?
For example, total expenses as a proportion of turnover might range from around 64% to 93% depending on turnover size; cost of sales, labour, rent and motor vehicle expenses all have typical ranges relative to turnover.
How can a business use these benchmarks effectively?
A business can calculate its own ratios (such as total expenses to turnover) and compare them to the ATO’s ranges to spot areas for improvement, correct recording errors or justify strategic differences in the cost structure.
What are ATO business benchmarks used for?
They help cabinet makers compare their business performance against similar businesses, based on key benchmark ratios.
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