ATO benchmarks for barbers

This ATO industry is made up of shops cutting hair for men and boys, some of which also sell personal care products and tobacco. For barbers, the ATO names total expenses as a share of turnover as the key range, the measure it judges to predict a barber's turnover most accurately.

Shops are sorted by the main activity they report, with the words in a trading name helping decide where each one goes. The ATO sets aside the smallest and largest businesses by turnover, any reporting several activities and any still in their first year of trading when the year began, and it removes results lying well outside the pattern.

Turnover is money from cuts, shaves and anything else sold, excluding GST. The ATO counts every business cost in total expenses except payments to associated persons, a spouse or other relatives among them.

In a barbershop, rent on the shop, wages and commission paid to barbers, retail stock such as hair products and tobacco, and merchant fees on card takings all fall inside total expenses. Commission belongs there because the ATO's expense total takes in contractor and commission payments.

The ATO publishes no cost of sales ratio for barbers. It releases a ratio only when enough businesses in an industry report that expense and the results pass its statistical tests, and a trade that mostly sells its time is unlikely to have a large cost of sales. Where the ATO does publish cost of sales, salary and wages are taken out of it. Products a shop buys to resell still count here, through total expenses.

A band shows where a slice of shops sits either side of the mean result for barbers in that turnover range, rather than a limit to stay above or below, and the ATO rounds its ends to whole numbers. Turnover ranges are drawn for each industry separately. Most industries get low, medium and high ranges; barbers get only a lower and an upper range.

The share of turnover taken by expenses jumps between them. In both years the whole upper band sits above the lower band, with a clear gap in between, and the upper band is the narrower of the pair.

Comparing years, 2023-24 sits level with or below 2022-23 at every end. In the lower range the bottom end held and the top end slipped slightly, so the band tightened. In the upper range both ends came down, the bottom end by more, so that band widened.

On the ATO's list of reasons for a ratio above the range, the clearest fit for a barbershop is rent or staff costs that are heavy for the number of cuts sold, for example barbers rostered through quiet weekday hours. Prices set lower than nearby shops charge, or hair products bought at a higher cost, lift the ratio as well. So do takings that miss the books: cash handed over at the counter and not rung up, or cash taken from the till to buy supplies without the sale being recorded.

Unrecorded costs such as cash wages can pull a result under the range, and so can a higher mark-up or tighter running costs than other shops.

The recording checks come first: daily takings in the booking or point-of-sale system agreeing with card settlements and banked cash, every rent and supplier invoice entered, and leftover retail stock counted at year end.

From a complete financial year's profit and loss, divide total expenses, less any payments to associated persons, by turnover excluding GST. Then read the result against the band for the shop's turnover range.

The ATO's group is built from established, single-activity businesses with extreme results removed, so a shop's opening year, a year cut short, or a year carrying a big one-off cost such as a major repair may not line up neatly. The group covers men's and boys' haircutting, and businesses reporting several activities sit outside it. Because the lower and upper bands do not overlap, a shop whose turnover is close to the line between the ranges is compared with quite different bands depending on which side it falls.