ATO benchmarks for computer stores

The ATO's computer retailing group covers stores that sell computers, programs and the accessories that go with them, and some also repair machines or offer help tied to a sale. Other electrical retailers, software developers and computer consultants are not included. The ATO sets cost of sales, measured against turnover, as the industry's key range, treating it as the most accurate ratio for predicting a computer store's turnover.

The ATO places each store by its main reported activity, drops businesses outside its turnover limits, those reporting several lines of activity and those in their first year, and removes outliers before working out the ranges.

Turnover is the store's income from goods and services, excluding GST. Total expenses covers the year's costs bar anything paid to family members and other associated persons, and cost of sales is the narrower figure, with salary and wages kept out.

Laptops, desktops, monitors, components, printers, accessories and software bought to sell fall in cost of sales, as do parts fitted during repairs, and all of these also count within total expenses. Wages for technicians and sales staff sit outside cost of sales and land in total expenses alone, alongside shop rent, card fees and vehicle running costs.

Because a technician's time is not part of cost of sales, repair and installation income adds to turnover without adding much to cost of sales, so a store with a bigger service side can show a lower cost of sales share. A store that mostly sells boxed hardware has more of its spending in cost of sales.

Each band covers a share of stores near the mean ratio for its turnover range rather than setting a minimum or maximum, and the ATO rounds both ends to whole numbers. The turnover ranges are set for computer retailing on its own, and a band is used since stores differ in where they trade and how they are run.

Total expenses rise from the lowest turnover range to the highest, and the band narrows, most sharply in the top range. Cost of sales also sits highest in the top range: its lower end climbs at each step, while the band tightens in the middle range and widens again at the top. In both years every band overlaps the band beside it, on both measures.

Against 2022-23, total expenses in 2023-24 are lower at both ends in every range. Cost of sales has moved up at both ends in the lowest range and down at both ends in the middle and top ranges.

A store above a range has high costs for its sales. In computer retailing the ATO's reasons can show up as damaged or outdated stock that cannot be sold, laptops or parts taken home for family use still counted as shop stock, products sourced at a higher cost than competitors pay, rent or staff heavy for the level of sales, thin margins on hardware, sales left out of the point of sale records, or till cash used for purchases without the sale being entered.

A result below a range can reflect stock purchases filed under another expense heading, bills missing from the books, a stronger mark-up, or a more efficient store. Recording checks come first:

• each distributor invoice from the year appears in the books, including stock bought online or on a card
• the year-end stocktake covers the shop floor, the back room and parts kept for repairs
• sales and repair takings agree with deposits to the bank

Pull a full financial year's totals off the profit and loss, divide cost of sales by turnover and total expenses (less payments to associated persons) by turnover, and look up the band for the store's turnover range. A part year, a store's first year, a year with a large unusual expense or a store that also runs a separate line of work reads differently, because the ATO builds its ranges from full years and removes first-year businesses, businesses reporting several activities and outliers.

Stores with only a minor cost of sales amount, or none, are pointed by the ATO's industry page to the total expenses band.