Calculate your profit, gross margin, and markup percentage based on the cost and selling price of a product.
This calculator computes the gross profit, gross margin percentage, and markup percentage for a product or service, given its cost and selling price. Margin and markup are related but distinct concepts: margin is profit as a percentage of the selling price, while markup is profit as a percentage of the cost. Confusing the two is a common business mistake that can lead to underpricing and lower-than-expected profit.
Gross margin and markup use the same profit figure (selling price minus cost) but express it as a percentage of different bases — selling price for margin, and cost price for markup.
Formula: Gross Profit = Selling Price − Cost Price. Gross Margin % = (Gross Profit ÷ Selling Price) × 100. Markup % = (Gross Profit ÷ Cost Price) × 100.
Example: A product costing A$50 sold at A$80: Gross Profit = A$30. Gross Margin = A$30 ÷ A$80 = 37.5%. Markup = A$30 ÷ A$50 = 60%. Note that a 60% markup produces a 37.5% margin — not 60% — because the bases differ. If you target a 40% margin, you need a markup of: A$50 ÷ (1 − 0.40) = A$83.33 selling price, or a 66.67% markup on cost.
Gross margin is one of the most important metrics for any Australian business — it determines whether a business has enough profit from each sale to cover operating overheads (rent, wages, utilities, marketing) and generate a net profit. Healthy gross margin percentages vary significantly by industry: retail businesses typically operate on gross margins of 20-50%, while service businesses (where the "cost" is mainly labour) can operate at 50-80%+ gross margins. GST-registered businesses in Australia must add 10% GST to the selling price charged to Australian consumers, which means your pricing should account for the GST component — the price you enter in this calculator should typically be the GST-exclusive price if you want to measure margin on the taxable supply. For example, if you sell a product for A$88 including GST, the GST-exclusive price is A$80 (A$88 ÷ 1.1), and you should use A$80 as the selling price for margin calculations. If you are selling to other GST-registered businesses (B2B), they will claim back the GST as an input tax credit, so the GST-exclusive price is the effective cost to them. The difference between gross margin and net profit margin is significant: gross margin only deducts the direct cost of goods or services sold, while net profit margin also deducts all operating expenses, interest, depreciation, and tax — a business with a healthy gross margin can still make a net loss if overheads are too high.
Margin (gross margin %) expresses profit as a percentage of the selling price. Markup (%) expresses the same profit as a percentage of the cost. The same dollar profit produces different percentages under each measure because the denominators differ. A common confusion: if you add a 50% markup to a A\$100 cost, you get a A\$150 price — but the gross margin is only 33.3% (A\$50 profit ÷ A\$150 selling price), not 50%. Always confirm which measure a target is expressed in before setting prices.
Gross margin benchmarks vary widely by industry. Australian retail generally operates at 30-50% gross margin; cafes and restaurants at 60-70% (on the food component); software and SaaS businesses at 70-80%+; construction at 10-25% (with thin margins but large volumes); and professional services at 50-70% (where labour is the main cost). Compare your gross margin to industry benchmarks via the ATO's industry benchmarks tool (available through the ATO's website) to assess whether your margin is in the expected range for your sector.
No — for margin calculations, use the GST-exclusive selling price. GST collected from customers is a tax you collect on behalf of the ATO and remit in your BAS; it is not your revenue. Including GST in the selling price inflates the apparent margin and misrepresents the true profitability. For example, if you charge A\$110 including GST, use A\$100 as the selling price in this calculator (the amount you keep before remitting A\$10 to the ATO).
Use the formula: Selling Price = Cost ÷ (1 − Target Margin %). For example, with a cost of A\$60 and a target gross margin of 45%: Selling Price = A\$60 ÷ (1 − 0.45) = A\$60 ÷ 0.55 = A\$109.09. A common mistake is to add the target margin percentage directly to the cost (which calculates a markup, not a margin): adding 45% to A\$60 gives A\$87, which has a margin of only 31.1%, not 45%.
Gross margin deducts only the direct cost of goods or services sold (cost of goods sold, or COGS) from revenue. Net profit margin deducts all expenses: COGS plus operating expenses (wages, rent, utilities, marketing), depreciation, interest, and income tax. A high gross margin business can still have a low net profit margin if operating costs are high. For Australian small businesses, monitoring both gross and net margin is important — gross margin tells you whether your pricing covers your direct costs; net margin tells you whether the business is actually profitable.
The ATO publishes industry benchmark data for a range of small business sectors, showing the typical range of gross profit percentage and other financial ratios for businesses in each industry, based on ATO tax return data. If your gross margin falls significantly outside the benchmark range for your industry, the ATO may query whether your reported income is complete or whether you are overclaiming deductions. The benchmarks are also useful for self-assessment — if your margin is well below the industry range, it may indicate a pricing, cost control, or stock management issue.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute financial, accounting, or business advice. This calculator computes gross margin and markup based on the cost and selling price inputs provided, and does not account for GST, operating overheads, tax, or other business-specific costs. Pricing decisions should consider all costs, market conditions, and competitive factors. Consult a qualified accountant or business adviser for advice specific to your business.