ATO benchmarks for alarm installers

This ATO group is made up of businesses whose work is fitting security systems along with fire and smoke alarms. Firms that mainly import or manufacture alarm gear, fit alarms to vehicles or put in video surveillance fall outside it. The key range the ATO names for this trade is total expenses against turnover, the ratio it rates as tracking turnover most accurately across the industry.

Installers land in the group through the main activity they report. The ATO then sets aside businesses under or over its turnover limits, those reporting multiple activities and those that had traded for less than a year before the year began, and it strips out results sitting far from the rest.

Turnover here is income from the goods and services a business sells, excluding GST. On the cost side, total expenses is the full cost of running the business minus payments to associated persons, such as family members.

On an alarm business's books, the sensors, sirens, keypads, backup batteries and cable fitted on jobs all count in total expenses. So do technicians' wages, bills from subcontracted electricians, fuel and upkeep for the vans, repairs to test gear and tools, insurance and any storeroom rent.

This page shows the total expenses band only. The ATO does publish a cost of sales ratio for alarm installation, but as a secondary guide rather than the key range. That the ratio is published at all shows enough installers report cost of sales for the ATO to release it. In that figure the ATO takes out salary and wages, so technicians' pay sits only in total expenses, however a business records it.

Each band covers a slice of installers grouped about the mean ratio for that turnover range, so it is neither a floor nor a ceiling, and the ATO rounds both ends to whole numbers. The turnover ranges are drawn for this industry alone, from the way its own results spread.

Total expenses take a larger share of turnover as installers grow: both ends of the band climb from the lowest range to the highest in each year. The band tightens with size too, a little between the lowest and middle ranges and by more in the top range, and in both years the top band starts exactly where the middle band stops.

Set against 2022-23, the 2023-24 middle and top bands sit lower at both ends, and the middle band widened because its lower end fell further than its upper end. The lowest band kept its lower end and rose slightly at the upper end.

The ATO gives several reasons a business can sit above a range, and some fit installation work closely: suppliers charging more for detectors and panels than rival installers pay, cable offcuts and spare fittings lost as waste, technician hours that run heavy for the work billed, or a thinner mark-up on equipment and labour. Sales left out of the books, such as a small cash job with no invoice, push the ratio up too.

Below the range, the ATO's list points to costs left unentered, such as a subcontractor's bill, or to a business that charges more or runs leaner than others.

Ruling out a recording cause comes first, by confirming:

• every supplier and subcontractor bill entered for the year
• each finished job invoiced, small service calls included
• parts still in vans and the storeroom counted at year end
• bank deposits matched to the invoices customers paid

Start with a full financial year of profit and loss figures, subtract any payments to associated persons from total expenses, and divide what is left by turnover excluding GST. Compare the result with the band for the turnover range the business falls in.

Results for a part year, an installer's first year or a year with a large one-off cost can read differently, because the ATO leaves out businesses in their first year and those with more than one activity, and trims extreme results. An installer mostly doing video surveillance or vehicle alarms is outside this group altogether. A large commercial installation that runs across year end can also leave its costs in one year and its invoice in the next.