ATO benchmarks for carpenters

The ATO's carpentry services group covers carpenters doing construction, commercial and household work: formwork, hanging doors, putting up partitions and helping build or renovate houses. Cabinet makers are outside it. The ATO names total expenses to turnover as the key range for carpentry, judging it the most accurate ratio for predicting a carpentry business's turnover.

Businesses are allocated by the main activity they report. The ATO drops those below and above its turnover cut-offs, those reporting several activities and those still short of a year's trading when the financial year began, then takes out outliers before the ranges are set. That leaves bands built from carpenters past their first year who report carpentry as their single activity.

Turnover is the income from carpentry work and any materials billed to clients, excluding GST. Total expenses is every cost of running the business, minus amounts paid to a spouse who handles the admin or any other associated person.

The ATO publishes no cost of sales range for carpentry services, and the tables here carry its key range, total expenses, while its own page lists labour and motor vehicle ranges as a guide only. Its methodology sets a ratio aside unless enough of an industry reports that expense, and it expects many service businesses to carry little cost of sales.

In a carpenter's books, total expenses gathers framing timber, formwork ply, decking and fixings, apprentice and employee wages, subcontractor invoices, ute fuel and servicing, saw blades and nail gun repairs, hired lifts or scaffold, mobile phone and quoting software, and public liability insurance. A carpenter on labour-only work, with the builder supplying the timber, carries far less materials cost than a carpenter who supplies and fixes.

Each range marks a band of carpentry businesses grouped near the mean ratio in each turnover range. It sets no minimum or maximum, the ATO publishes the ends rounded to whole numbers, and the turnover cut-offs are drawn for carpentry alone. The ATO sets a band rather than a single point because location, region and the way a business is set up all shift results.

Total expenses climb steeply as turnover grows, with the biggest step between the middle and top ranges. The bands for the lowest and middle turnover ranges overlap, while the top band sits clear above the middle band. The bands are wide below the top range and much narrower in it, so carpentry businesses of similar size in the lower ranges report quite different cost shares.

Next to 2022-23, the newer figures are lower or level at every point: the lowest band keeps its floor but finishes lower, and the middle and top bands both start and finish lower.

Above a range, costs run high against income. For a carpenter, the ATO's reasons can look like offcuts and damaged timber thrown out, timber bought dearer than other carpenters pay, apprentices or subcontractors kept on through quiet weeks, quotes with a thin margin over materials and hours, cash jobs left uninvoiced, or cash from a homeowner spent at the timber yard without the job income going into the books.

Sitting below a range can point to costs missing altogether, such as cash wages for a labourer, a stronger mark-up on jobs, or a business that works with less waste. These checks rule out a recording cause first:

• every subcontractor invoice and hire company bill from the year has been entered
• each job invoice ties to money received in the business bank account
• timber and hardware held over for coming jobs is counted at year end

Divide a full financial year's total expenses as the profit and loss shows them, with associated persons' payments removed, by turnover for the same year, then find the band for the matching turnover range. Because the ATO leaves out first-year businesses, multi-activity businesses and outliers, a year that is not complete, a first year in business, a year with an unusually large expense or a carpenter who also runs a separate trade reads differently.

The mix of labour-only and supply-and-fix jobs can shift the share from year to year, as can a large job invoiced just before or just after the year ends. The ATO's carpentry figures do not extend to cabinet making.