What is the difference between markup and margin?

Markup is the profit expressed as a percentage of cost. Margin is the profit expressed as a percentage of the selling price. A 30% markup on a $100 cost gives $130 selling price with $30 profit -- the markup is 30% (30/100) but the margin is 23.1% (30/130). To achieve a 30% gross margin, you need a 42.9% markup: selling price = $100/0.70 = $142.86. Mixing these up is one of the most common pricing errors in small business.

Do I have to charge GST on all my invoices?

If your annual turnover is $75,000 or more (or $150,000 for non-profits), you must register for GST and charge it on all taxable supplies. Under $75,000 annual turnover, GST registration is optional. Once registered, you charge 10% GST on labour and materials (taxable supplies) and can claim back the GST paid on your own purchases (input tax credits). Note that certain supplies are GST-free (basic food, medical services) but most building and trade work is taxable.

What is the standard markup for materials in the trades?

Industry norms vary by trade and region, but 20-30% on materials is typical in Australia for most trade contractors. This markup recovers: the time spent purchasing and sourcing materials, credit risk (if a client defaults), delivery and handling costs, storage costs, warranty and returns administration, and working capital tied up in materials before payment. Simply passing materials at cost is not commercially sustainable and leaves no margin for these real costs.

Markup & Discount Calculator — Free Tradies Calculator

🎯

A painter just received a trade supplier invoice for materials at $1,840. They apply a 30% markup to materials when billing clients. Before the final invoice goes out, they need the client price and the GST-inclusive total.

Markup & Discount Calculator

Business

Cost price ($)

Markup (%)

Tax

Selling = Cost × (1 + Markup%) · Margin = Profit ÷ Sell A 25% markup gives a 20% margin — markup is always higher than the equivalent margin.

Reference: ATO — Business Income and Expenses

ℹ️ Results are estimates for planning purposes. Verify with current standards and a qualified professional.

1 What this calculator does

Calculates the selling price from a cost price and markup percentage (or the sale price from a regular price and discount percentage). In markup mode: shows profit, GST component and GST-inclusive price. In discount mode: shows customer saving and final sale price.

2 Formula & professional reasoning

Markup mode:
  Selling price = Cost x (1 + Markup% / 100)
  Profit = Selling price - Cost
  GST = Selling price x 0.10 (or custom tax %)
  Inc. tax price = Selling price x (1 + Tax% / 100)
Discount mode:
  Sale price = Regular price x (1 - Discount% / 100)
  Customer saving = Regular price - Sale price

Markup is calculated on cost (cost is the base). Margin is calculated on revenue (selling price is the base). A 30% markup on $1,840 cost gives $1,840 x 1.30 = $2,392 selling price. The profit is $552, which is 30% of cost. The gross margin percentage is $552/$2,392 = 23.1% -- margin is always lower than markup. This distinction matters for financial reporting and understanding true profitability.

3 Worked examples

⚠️ Illustrative example only — not clinical or professional instruction.

Basic

Materials markup for client invoice

Given: Cost: $1,840 | Markup: 30% | GST: 10%

Working:

Selling price: $1,840 x 1.30 = $2,392 | Profit: $2,392 - $1,840 = $552 | GST: $2,392 x 0.10 = $239.20 | Inc. GST: $2,392 x 1.10 = $2,631.20

Answer: Client price: $2,392.00 | GST: $239.20 | Inc. GST: $2,631.20

💡 30% markup on cost = 23.1% gross margin on revenue. The $552 profit covers the tradie's time to source, purchase and deliver the materials.

Standard

Trade supplier discount -- what does the client actually save?

Given: Regular price: $4,500 | Trade discount: 25%

Working: Sale price: $4,500 x 0.75 = $3,375 | Saving: $4,500 - $3,375 = $1,125

Answer: Trade price: $3,375 | Customer saving: $1,125 (25%)

💡 A 25% trade discount on a $4,500 item saves $1,125. If the tradie then applies a 20% markup to the $3,375 trade price: $3,375 x 1.20 = $4,050 client price -- still below the regular retail price.

Advanced

Markup vs margin confusion -- same gross profit target

Given: Cost: $800 | Target: 25% profit on revenue (25% margin)

Working:

25% margin means profit = 25% of selling price | So cost = 75% of selling price | Selling price: $800/0.75 = $1,066.67 | This is NOT the same as 25% markup: $800 x 1.25 = $1,000

Answer: 25% margin requires selling at $1,066.67 | 25% markup gives $1,000 | Difference: $66.67

💡 Confusing margin and markup causes underbilling. If you want 25% gross margin, use selling price = cost / (1 - margin%). If you want 25% markup, use selling price = cost x 1.25.

4 Sanity check

Markup vs margin relationship

Markup% is on COST | Margin% is on SELLING PRICE | Markup always > Margin for the same profit amount

30% markup = 23.1% margin | 25% margin = 33.3% markup

GST registration requirement in AU

Turnover over $75,000/yr: must register for GST | Under $75,000: optional | Once registered, charge GST on all taxable supplies

Typical trade markup on materials

Plumbers/electricians: 20-30% | Builders: 15-25% | Painters: 20-35%

Markup covers the cost of purchasing, holding, delivering and warranty on materials.

Markup on labour

Labour rate already includes margin | Do not double-apply markup to labour and materials separately if using an all-in rate

5 Common errors

Error	Cause	Consequence	Fix
Confusing markup and margin -- using margin% as a markup%	Not understanding the difference	Underpricing -- intended 30% margin becomes 23.1% margin \| Significant profit leakage	For 30% gross margin: selling price = cost / (1 - 0.30) = cost / 0.70. For 30% markup: selling price = cost x 1.30. 30% margin requires a 42.9% markup. Always confirm which basis the percentage refers to.
Not adding GST after the markup	Treating markup as the final price	Invoice excludes GST -- under-collecting tax if GST-registered	If you are GST-registered, always add GST after the markup. Client price = (Cost x markup factor) x 1.10. The GST is collected on behalf of the ATO and is not your revenue.
Applying markup to the GST-inclusive cost price	Not stripping GST before applying markup to the cost	Markup applied to a larger base -- overcharging clients on materials	When you purchase materials, your cost is the GST-exclusive (ex-GST) price because you claim the input tax credit. Apply markup to the ex-GST cost. Then add GST to the marked-up ex-GST selling price.
Undercharging for materials by not applying any markup	Passing through materials at cost to appear competitive	No recovery for the time, effort and risk in sourcing and purchasing materials \| Gross margin understated	Materials markup is legitimate and expected in the trades. A 20-30% markup on materials is industry standard. The markup recovers purchasing time, credit risk, delivery, handling and warranty claims.

6 Reference & regulatory links

🇦🇺 Australia

🇺🇸 United States

7 Professional workflow

Common tools used alongside this one:

📋

Job Quote Calculator

Job Quote Calculator combines labour, materials and overhead -- markup on materials feeds into the quote as a cost component

→

Input	Result
30% markup on $1,840	Client price $2,392 \| Inc. GST $2,631
25% discount on $4,500	Sale price $3,375 \| Saving $1,125
30% markup vs 30% margin	Markup: cost x 1.30 \| Margin: cost / 0.70