Margin, markup, and the GST you are holding.
Three sums people get wrong in the same breath: a GST-inclusive price is not revenue, a margin is not a markup, and the price you need for a target margin is not cost plus that percentage. All three are below, with the formula written out and two worked examples.
Your margin
price includes 10% taxIt runs in your browser: nothing you type is sent anywhere, and the arithmetic is the file this page loads — the same one our tests check against figures worked by hand.
The formula, in full
ex-GST price = tax-inclusive ? price ÷ (1 + rate) : price
gross profit = ex-GST price − (unit cost + shipping, fees, packaging)
margin % = gross profit ÷ ex-GST price × 100
markup % = gross profit ÷ total cost × 100
price needed = total cost ÷ (1 − target margin)
Two things go wrong here more than anything else. A GST-inclusive price has a tax component of 1/11th, not 10% — $49 inclusive is $44.55 plus $4.45, so a margin worked on $49 is overstated. And margin is not markup: a 50% margin is a 100% markup, and a supplier quoting “50% markup” is offering you a 33% margin.
Two of them, computed rather than typed.
Both are produced by the same file the calculator above uses, so an example here cannot disagree with the tool beside it. Every figure is checked against hand-worked arithmetic in our test suite.
A $49 candle, GST-inclusive
price 49 · cost 18.5 · extraCosts 4.2 · taxRate 10 · taxInclusive true
A GST-inclusive price hides 1/11th of itself. The margin is on the ex-GST figure, not on the sticker.
A $1,515 vanity, ex-GST, sold to the trade
price 1515 · cost 1080 · extraCosts 95 · taxRate 10 · taxInclusive false
Freight on a bulky item is the cost people forget. Here it is $95 a unit and a fifth of the profit.
Straight answers.
Is margin the same as markup?
No, and the difference costs money. Margin is profit as a share of the price; markup is profit as a share of the cost. A 50% margin is a 100% markup. A supplier who says “we work on 50% markup” is describing a 33% margin. The calculator shows both, every time, so the sentence cannot be misread.
How does GST change it?
A GST-inclusive price is 11/10ths of the real revenue: $49 inclusive is $44.55 of revenue and $4.45 of tax you are holding for the ATO. Working a margin on the $49 overstates it by about two points on a typical product. Tell the calculator which kind of price you typed and it does the division.
What should I include in cost?
Everything that happens per unit: the unit price, inbound freight, packaging, payment fees, and outbound shipping if you are paying it. Not rent, not salaries, not software — those are fixed costs, and the break-even box is where they belong.
What margin should I aim at?
It depends on the category and nobody honest will give you one number. What the calculator can tell you is the price a target margin needs, which is the actionable version of the question: enter the cost, enter the margin you want, and it works backwards.
Does this handle VAT or sales tax?
Yes — set the rate. The arithmetic is the same for 20% UK VAT, 10% Australian GST or a US state sales tax; only the number changes. The one difference worth knowing: US sales tax is usually quoted exclusive, so leave the inclusive toggle off.
A margin is only real if the order completes.
Bilby walks your buying path every night from six regions and tells you when a step breaks — which is the difference between a margin on paper and money in the account.
Where to go from here
- What a store costs to build — if the margin says you can afford a better one, the prices are published with the hours shown
- Break-even ROAS — the same margin, pointed at your ad spend — this is the number that decides whether a ROAS is good news
- Conversion rate — what one tenth of a percent is worth on your traffic