How to Work Out Your Real Profit After Shipping and GST

Why your markup isn't your profit

Say you buy something for A$18 and sell it for A$55. Feels like a great deal, right? That's three times what you paid.

Here's the thing. By the time you take out GST, postage, the little box, card fees and the ad that brought the customer in, you might only keep about A$10.

That's still OK. But it's a very different story from "I tripled my money." So let's do it properly.

What's the simple formula?

Here it is in plain words:

Profit per sale = price without GST − product cost − shipping − packaging − payment fees − ad cost per sale

And then:

Margin = profit ÷ price without GST × 100

That's it. No fancy maths. Just make sure you include everything.

How do I take GST out of my price?

If you're registered for GST, 1 out of every 11 dollars a customer pays belongs to the ATO. Not you.

So to find the GST in a price that already includes it, divide by 11.

• A$55 ÷ 11 = A$5 GST
• A$55 − A$5 = A$50 that's actually yours

If you're not registered for GST, you don't take anything out. You must register once your turnover reaches A$75,000 a year.

One more thing. If you're registered, you can usually claim back the GST on business costs like postage and packaging. Keep it simple: your accountant or the ATO website can help with your exact setup.

Can you show me a real example?

Sure. Here's a typical small product sale, with rough numbers:

So the margin is A$10.29 ÷ A$50 = about 20.6%.

Not bad. But notice how shipping and ads together cost more than the product itself. That surprises a lot of people.

What costs do people usually forget?

These are the sneaky ones:

• Free shipping. If you offer it, you're paying it. On cheap items, it can wipe out your profit.
• Returns and broken items. Even a few a month adds up.
• Buy now, pay later fees. Afterpay and similar services cost more than normal card fees.
• Monthly bills. Your store plan, apps and software aren't per sale, but they still need to be paid from your profit.
• Your own time. Packing orders at 10pm isn't free, even if it feels like it.

What's ad cost per sale?

This one trips people up. It's how much you spend on ads to get one sale.

If you spend A$200 on Facebook ads and get 25 sales, your ad cost per sale is A$200 ÷ 25 = A$8.

If that number is eating most of your profit, it might be worth putting more effort into free traffic from Google, like writing helpful guides about what you sell.

How many sales do I need to break even?

Take your monthly fixed costs (store plan, apps, software) and divide by your profit per sale.

If your bills are A$150 a month and you make A$10.29 a sale, you need about 15 sales a month just to cover costs. Everything after that is profit.

Let the calculator do the maths

You don't need to do all this by hand. The profit calculator works it out live as you type, including GST, margin, break-even and monthly profit.

Still working out your setup costs? Read how much it costs to start an online store in Australia.

Frequently asked questions

How do I calculate GST from a price that includes GST?

Divide the price by 11. For a A$55 sale, the GST is A$5.

What's a good profit margin for an online store?

It depends on what you sell, but many small stores aim for 20–40% after all costs. Under 10% leaves very little room for mistakes.

Is shipping included in profit calculations?

Yes, always. If you pay it, it comes out of your profit, even if you call it "free shipping."

Do I take GST out if I'm not registered?

No. If you're not registered for GST, you don't charge it, so there's nothing to take out.

What's the difference between markup and margin?

Markup compares profit to what you paid. Margin compares profit to what the customer paid (without GST). Margin is the one that tells you how healthy your business is.

All numbers are examples and estimates only. This is general info, not financial or tax advice. Check with your accountant or the ATO.