Consumer prices must be shown GST-inclusive. Registered businesses claim the GST in their costs back, so margin maths runs on ex-GST numbers.
Margin and markup are not the same number.
Markup is profit as a percentage of cost; margin is profit as a percentage of sell price. A $40 cost sold for $60 is a 50% markup but only a 33.3% margin. Mixing them up, quoting a "50% margin" while calculating a 50% markup, quietly shaves a third off expected profit. The conversion:
| Markup on cost | Equivalent margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 150% | 60% |
Where GST fits in pricing.
For a registered business, margin maths runs entirely on ex-GST numbers: you claim back the GST in your costs (as credits), and the GST you add to the sell price was never yours, you collect it and remit it with your BAS. The 10% goes on after the margin is set, producing the GST-inclusive shelf price consumers must be shown. Price ex-GST, add GST last: never take your margin from a GST-inclusive figure, or you're taking margin on money that belongs to the ATO (the ÷11 trap in reverse).
Not registered yet?
Then GST cuts the other way: you can't claim the GST in your costs, so your true cost price is the GST-inclusive one, and you can't add GST to your sell price. Sellers competing with registered businesses on shelf price wear that difference in margin, which is one quiet reason growing retailers register before they must.
Quick answers.
What's the difference between margin and markup?
Markup is profit over cost; margin is profit over sell price. A $40 item sold at $60 carries a 50% markup but a 33.3% margin. Margin is always the smaller number: and the one your accountant means.
Do I calculate margin on GST-inclusive or ex-GST prices?
Ex-GST, if you're registered. The GST in your costs comes back as credits, and the GST on your sales goes to the ATO. Set the margin on ex-GST numbers, then add 10% for the shelf price.
How do I convert markup to margin?
Margin = markup ÷ (100 + markup) × 100. So a 50% markup is 50 ÷ 150 = 33.3% margin. The calculator shows both automatically.
Why must shelf prices include GST?
Australian consumer law requires prices shown to consumers to be the total price payable, GST included. Business-to-business quotes are customarily ex-GST, with GST itemised on the invoice.
Related: How to calculate GST · GST for Shopify stores · All business calculators
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