ATO Benchmarks for Cafés and Restaurants: How Does Your Venue Stack Up in 2026?
Every year, the Australian Taxation Office publishes small business benchmarks — financial ratios built from millions of actual lodged tax returns — that show what healthy performance looks like for cafés, restaurants, bars, and other hospitality venues across Australia.
In March 2026, the ATO updated those benchmarks using 2023–24 financial year data. And from 1 July 2026, the 4.75% Fair Work wage increase flowed through to almost every hospitality payroll in the country.
The result? Many venues that were comfortably inside their benchmark range at the end of FY2025 are now sitting outside it — without having changed a single thing about how they operate.
That matters for two reasons. First, the ATO uses these benchmarks to identify businesses that may be under-reporting income or over-claiming expenses — and venues that consistently fall outside the range attract closer scrutiny. Second, and more practically, the benchmarks are one of the most useful tools a hospitality business has for understanding whether its financial performance is on track.
This post explains what the current ATO benchmarks are for restaurants, cafés, and hospitality venues, what they actually measure, and what to do if your numbers aren't where they should be.
What Are ATO Small Business Benchmarks?
ATO small business benchmarks are financial ratios — expressed as a percentage of turnover — that show the typical range of expenses for businesses in a given industry and turnover bracket.
They're built from actual tax return data lodged by Australian businesses, which means they reflect what real venues are actually spending relative to their revenue — not theoretical targets.
The ATO uses these benchmarks in two ways:
As a compliance tool — to identify businesses whose expense ratios fall significantly outside the norm, which can indicate unreported income, excessive deductions, or GST errors. If your business consistently falls outside the benchmark range and you can't explain why, you're more likely to receive an ATO review.
As a performance tool — to give business owners a way to compare their numbers against similar businesses. If your cost of sales is running well above the benchmark for venues your size, that's a signal worth investigating — whether or not it's a compliance issue.
The benchmarks are updated annually. The current version, published in March 2026, uses 2023–24 financial year data and is the most current available.
The Current ATO Benchmarks for Restaurants and Cafés (2023–24 Data, Updated March 2026)
The ATO publishes separate benchmarks for restaurants and coffee shops (cafés). Here are the key figures from the most recent update, which apply to the 2023–24 tax year and remain the reference point for your FY2025 and FY2026 lodgements.
Note: these are ranges — the ATO expects your figures to sit somewhere within the range for your turnover bracket. Falling outside the range is not automatically a red flag, but it does warrant a review and a clear explanation.
🍽 Restaurants — ATO Benchmarks (2023–24, Updated March 2026)
| Annual Turnover | Cost of Sales to Turnover Key benchmark | Labour to Turnover | Rent to Turnover |
|---|---|---|---|
| $65k – $450k | 32% – 39% | 23% – 34% | 9% – 14% |
| $450k – $900k | 32% – 38% | 24% – 34% | 8% – 13% |
| $900k – $2m | 32% – 37% | 24% – 33% | 7% – 12% |
| Above $2m | 31% – 36% | 24% – 32% | 6% – 11% |
Source: ATO Small Business Benchmarks — Restaurants. Updated 16 March 2026. Based on 2023–24 financial year tax return data.
☕ Coffee Shops / Cafés — ATO Benchmarks (2023–24, Updated March 2026)
| Annual Turnover | Cost of Sales to Turnover Key benchmark | Labour to Turnover | Rent to Turnover |
|---|---|---|---|
| $65k – $450k | 33% – 42% | 23% – 35% | 9% – 14% |
| $450k – $900k | 33% – 40% | 24% – 34% | 8% – 13% |
| $900k – $2m | 34% – 39% | 24% – 33% | 7% – 12% |
| Above $2m | 33% – 38% | 24% – 32% | 6% – 11% |
Source: ATO Small Business Benchmarks — Coffee Shops. Updated 16 March 2026. Based on 2023–24 financial year tax return data.
Why the July 2026 Wage Increase Has Changed the Picture
Here's the problem that many hospitality venue owners don't yet realise they have.
The ATO benchmarks are built from 2023–24 tax return data — a year before the 4.75% Fair Work wage increase took effect. That means the labour benchmark ranges were calculated when award rates were lower.
From 1 July 2026, the Hospitality Industry (General) Award and the Restaurant Industry Award both increased by 4.75%. A casual Level 1 food and beverage attendant who cost you a certain amount on a Saturday last year now costs meaningfully more this year — and that flows directly into your labour-to-turnover ratio.
The practical impact: a venue that was sitting at 32% labour as a percentage of revenue in FY2025 may now be running at 33–34% doing exactly the same volume of trade with the same roster. That still sits within the benchmark range for most turnover brackets — but the margin is thinner, and venues that were already running tight may now be above the upper end.
To make it concrete: if your venue turns over $800,000 a year and your wages bill increased by 4.75% from July — assuming a typical 30% labour ratio — that's an additional $11,400 per year in labour cost that was not there 12 months ago. That's before the compounding effect of Payday Super, where super now hits your account every pay cycle rather than sitting as a quarterly accrual.
This is not a reason to panic. It is a reason to look at your numbers now — in August 2026, at the start of the new financial year — rather than waiting until your accountant sits down with your June 2027 figures.
Want to know exactly where your venue sits against the ATO benchmarks right now? Evisory's hospitality accountants can run a benchmark comparison using your actual numbers.
Book a Free Chat →What Each Benchmark Actually Means for Your Venue
Cost of Sales (the Key Benchmark)
The ATO flags cost of sales to turnover as the key benchmark for restaurants and cafés — the one it relies on most when assessing whether a venue's reported income looks reasonable.
Cost of sales in hospitality is your food and beverage purchases — what you spent buying the ingredients and drinks you sold. The benchmark range for restaurants sits at 31–39% depending on your turnover, with cafés slightly higher at 33–42%.
If your cost of sales is above the top of your range, the ATO's interpretation is that either your expenses are genuinely high (which may be legitimate) or your reported income is lower than it should be. Common legitimate reasons for above-benchmark cost of sales include:
High wastage or spoilage due to the nature of your menu
A supplier pricing structure that differs from the industry average
A high-end or premium offering where ingredient quality is a deliberate choice
Common illegitimate reasons — the ones the ATO is actually looking for — include unreported cash income and stock taken for personal use without being declared.
If your cost of sales is below the bottom of the range, you may be under-claiming supplier expenses, which is money left on the table.
The fix in either case is the same: ensure your bookkeeping is capturing cost of sales accurately, separately from other expenses, and reconciled against actual stock counts. This is where specialist hospitality bookkeeping makes a material difference — a general bookkeeper often miscodes expenses in ways that distort this ratio without anyone realising.
Labour as a Percentage of Turnover
The ATO's labour benchmarks for restaurants and cafés sit at 23–35% of turnover depending on the size of the venue. But there's a critical distinction that most hospitality owners miss: the ATO benchmark for labour is a wages-only figure — it typically does not include superannuation, workers' compensation, or payroll tax.
Your fully loaded labour cost — the real cost of employing people — runs approximately 14–20% higher than the wages-only number, depending on whether you're above the payroll tax threshold and your state's workers' comp rate.
This means a venue showing 30% labour on its tax return may actually be spending 34–36% of revenue on total employment costs. That's still within benchmark — but it's critical to understand which number you're measuring and comparing.
The benchmark also predates the July 2026 wage increase. At current Hospitality Award casual Level 1 rates, a Saturday shift now costs approximately $39.66 per hour and a Sunday shift approximately $46.27 — both figures that have moved since the 2023–24 benchmark data was compiled.
Practical action: calculate your labour percentage monthly, using your full payroll cost including super. Compare it to the ATO benchmark for your turnover bracket — but remember you're comparing wages-only ATO data against your fully loaded cost. If your wages-only number is already at the top of the benchmark range, your true labour cost position warrants a closer look at your roster.
Rent as a Percentage of Turnover
The ATO's rent benchmark sits at 6–14% of turnover for most restaurants and cafés, narrowing as turnover grows. This is the area where location has the most pronounced effect — a venue in Sydney or Melbourne's inner suburbs will typically run a rent percentage well above what a regional or suburban venue carries.
If your rent is above 14% of turnover, it doesn't automatically mean your business is unviable — but it does mean your food cost and labour cost need to be proportionally tighter to achieve a workable margin. A venue paying 16% in rent needs to run food cost at 28% and labour at 26% just to hit a 40% gross margin before overheads. That's a tight envelope.
The rent benchmark is one of the harder ratios to improve directly — your lease is your lease. But understanding where your rent sits as a percentage of revenue is essential context for every other financial decision you make, from menu pricing to trading hours to staffing levels.
What to Do If Your Venue Falls Outside the ATO Benchmarks
Falling outside a benchmark range is not automatically a problem — but it does require an explanation. The ATO expects that if your figures fall outside the range, you can account for why. Here's how to approach it depending on which direction you're out of range:
⚠️ Above the Benchmark Range
Your expenses are high relative to your revenue. This may be legitimate or it may be a signal worth investigating. Start here:
- Review your bookkeeping for miscoding errors — are non-COGS expenses sitting inside cost of sales?
- Confirm all income is being recorded — delivery platform income, cash sales, and function revenue
- Check for stock taken for personal use that hasn't been declared
- Consider whether a menu price review is overdue given cost increases
- Document any legitimate reasons your costs are structurally higher (premium ingredients, high-waste menu, etc.)
✅ Below the Benchmark Range
Your expenses are low relative to your revenue — which may indicate strong cost control, or it may mean some expenses aren't being captured. Check:
- Are all supplier invoices being recorded and coded correctly?
- Is stock wastage being captured, or is it simply going unrecorded?
- Are all staff costs included — super, casual loading, and on-costs?
- Is your chart of accounts structured correctly for hospitality?
The most important thing, regardless of which direction you're out of range, is that you can explain it. The ATO doesn't expect perfection — it expects accuracy and consistency. If your cost of sales genuinely runs above benchmark because you run a premium menu with imported ingredients, that's a defensible position. If it's above benchmark because your POS categories are miscoded and your food purchases are being double-counted, that's a bookkeeping problem that needs to be fixed before it becomes a compliance problem.
This is exactly the kind of review a specialist hospitality accountant or bookkeeper should be doing with your numbers every quarter — not just once a year at tax time.
How the ATO Uses Benchmarks to Select Businesses for Review
Understanding how the ATO actually uses benchmarks is useful context for any hospitality business owner.
The ATO cross-references your lodged tax return figures against the benchmark range for your industry and turnover bracket every year. If your figures are consistently outside the range — particularly if your cost of sales is very high relative to reported income — the ATO's data matching systems flag it for closer attention.
This doesn't automatically mean an audit. The ATO typically starts with a phone call or a letter asking you to review your records and explain any discrepancies. But if you can't explain the variance clearly, or if your records don't support your lodgements, that initial contact can escalate.
The other trigger is data matching between your BAS and your tax return. The ATO compares the income you report on your quarterly BAS against the income you declare in your annual return. If those numbers don't reconcile — for example, because function deposits were treated as income for BAS purposes but deferred for income tax purposes without proper documentation — it creates a discrepancy that can attract scrutiny.
The best protection against all of this is clean bookkeeping, accurate records, and a hospitality accountant or bookkeeper who reviews your numbers regularly and flags issues before they appear on the ATO's radar.
Using the Benchmarks as a Business Performance Tool — Not Just a Compliance Checklist
Here's the part most hospitality business owners miss: the ATO benchmarks are not just a compliance tool. They're one of the most practical performance benchmarks available to Australian venue operators — and they're free.
The data behind them comes from the actual tax returns of thousands of Australian restaurants and cafés across every turnover bracket. When the benchmark says cost of sales for a restaurant your size sits at 32–38%, that's what venues like yours are actually achieving — not a theoretical target set by a consultant.
Using the benchmarks proactively means:
Knowing which ratios to watch — cost of sales and labour are the two ratios that respond to decisions you make this week. Rent is harder to move. Utilities are largely fixed. Food cost and labour are where the work happens.
Setting internal targets within the range — if the benchmark for your turnover bracket is 32–38% cost of sales, a well-run venue should be targeting the lower half of that range, not just scraping under the upper limit.
Identifying problems early — if your cost of sales moves from 34% to 38% over two quarters, that's a signal. It might be a supplier price increase, a menu issue, a portion control problem, or a bookkeeping error. But you only catch it if you're measuring it regularly.
Giving your accountant or bookkeeper something to work with — benchmarks give your advisor a reference point for what's normal in your specific industry and turnover bracket. Without that, a review of your P&L is largely subjective.
Find Out Where Your Venue Actually Stands
Evisory works exclusively with cafés, restaurants, bars, bistros, and hospitality groups across Australia. We'll compare your current numbers against the ATO benchmarks, identify any gaps, and give you a clear picture of where your venue sits heading into FY2026–27.
📅 Book a Free 20-Minute ChatOr visit evisory.com.au/accounting to learn more about our hospitality accounting services.
Frequently Asked Questions — ATO Benchmarks for Hospitality
-
ATO small business benchmarks are financial ratios — such as cost of sales, labour, and rent as a percentage of turnover — compiled from actual tax return data lodged by Australian businesses. They're updated annually and show the typical range of expense ratios for venues in the same industry and turnover bracket. The current benchmarks use 2023–24 data, updated in March 2026.
-
The ATO benchmark for cost of sales in Australian restaurants sits at 31–39% of turnover depending on annual revenue. For cafés and coffee shops, the range is 33–42%. These are the key benchmarks the ATO uses when assessing whether a venue's reported income appears reasonable.
-
If your figures fall outside the benchmark range, the ATO may contact you to review your records or explain the discrepancy. Falling outside the range doesn't automatically mean an audit — but you need to be able to explain why. Clean bookkeeping and accurate records are your best protection. Speak to a hospitality accountant before responding to any ATO benchmark review correspondence.
-
The current benchmarks were built from 2023–24 data — before the 4.75% Fair Work wage increase from 1 July 2026. This means the labour benchmark ranges don't fully reflect current award rates. Venues whose labour cost has risen above the benchmark top end after the wage increase should review their roster efficiency and discuss the variance with their accountant.
-
At minimum, quarterly — aligned with your BAS cycle. Ideally monthly, as part of a regular management reporting review. The two ratios worth tracking most closely are cost of sales and labour as a percentage of turnover. Both respond to decisions you make in real time, whereas rent and fixed overheads are harder to influence.
-
No. The ATO labour benchmark is generally a wages-only figure built from what businesses reported under the "labour" expense category on their tax return. Your true fully loaded labour cost — including super at 12%, workers' compensation, and payroll tax where applicable — will typically run 14–20% higher than the wages-only number. Always clarify which basis you're using when comparing your labour ratio to the benchmark.
Evisory Accountants Pty Ltd is a registered tax agent (Tax Agent 26159051). ABN 61 645 115 635. This article is general in nature and does not constitute financial, legal, or tax advice. Benchmark figures are sourced from the ATO's published small business benchmarks (updated March 2026) and should be verified directly at ato.gov.au before making business decisions. Award rate figures are indicative only — always verify current rates via the Fair Work Ombudsman. Liability limited by a scheme approved under Professional Standards Legislation.