Australian restaurants turning over A$65,000 to A$500,000 report cost of sales at 32% to 39% of turnover, averaging 35%, while cafes in the smallest band run higher at 34% to 42%, averaging 38%. Skai Solutions uses the tax office bands here because they come from lodged returns rather than an overseas rule of thumb.
Nearly every food cost article you will find quotes 28% to 35% and cites nobody. Australia has a better number, built from the tax returns of the businesses themselves. The ATO small business benchmarks for restaurants and the ATO benchmarks for coffee shops are drawn from 2023-24 returns and were last updated in March 2026. Cost of sales divided by turnover is the tax office's own key benchmark for both industries.
| Restaurants | A$65,000 to A$500,000 | A$500,001 to A$2m | Over A$2m |
|---|---|---|---|
| Cost of sales as a share of turnover | 32% to 39% | 32% to 38% | 31% to 36% |
| Average | 35% | 35% | 34% |
| Total expenses as a share of turnover | 79% to 89% | 84% to 93% | 88% to 94% |
| Rent as a share of turnover | 11% to 17% | 8% to 12% | 6% to 9% |
| Cafes and coffee shops | A$65,000 to A$250,000 | A$250,001 to A$600,000 | Over A$600,000 |
|---|---|---|---|
| Cost of sales as a share of turnover | 34% to 42% | 35% to 41% | 33% to 38% |
| Average | 38% | 38% | 36% |
| Total expenses as a share of turnover | 73% to 86% | 81% to 90% | 86% to 93% |
| Rent as a share of turnover | 10% to 17% | 8% to 14% | 6% to 10% |
Three honest caveats. This is cost of sales, not food alone, so for a licensed venue it includes beverage and any other stock sold. It comes from lodged returns, so it is what businesses reported rather than an audited figure. And the tax office is explicit that sitting outside a band is not proof of anything, only a signal there may be room to improve.
Not from your invoices alone, which is the mistake that makes the number useless. The Restaurant Association of New Zealand Food Costing Guideline sets out the formula properly:
(opening inventory + purchases - closing inventory) divided by food sales, times 100.
Worked through with real handling. Say you start a week with A$10,000 of stock on the shelf, buy A$3,000 more, and count A$10,500 left at the end. You used A$2,500. If you sold A$6,500 of food that week, your food cost is 2,500 divided by 6,500, which is 38%. For a small cafe that lands inside the tax office band. For a restaurant of the same size it sits just outside the top of it.
Two rules that decide whether the answer means anything. Include or exclude GST on both halves, never one of each, which is the single most common way this number comes out wrong. And count on the same day each period, so you are comparing the same number of services rather than a week with an extra Saturday in it.
Look at the two tables together. A small cafe's band tops out at 42% while a small restaurant's tops out at 39%, and the averages sit three points apart. That is not cafes buying worse. It is product mix and price points: coffee, milk and a fifteen dollar plate leave less room to hide a cost rise than a menu with entrees, sides and a wine list on it.
The corollary matters more. Because cafes carry a higher cost of sales and a lower average transaction, every lost transaction costs a proportionally larger share of what was left over. A restaurant losing a A$90 booking and a cafe losing a A$12 coffee and toastie are not comparable events, but the cafe has to replace far more of them to stand still.
The Restaurant Association of New Zealand guideline lists five causes and they are worth checking in this order, because the first two account for most of it: portions larger than what your recipe was costed at, waste from over ordering, unexpected ingredient price rises, delivered weights not being checked against the invoice, and food leaving the premises as staff meals.
Notice what is not on that list. Nothing about sales. Food cost percentage is a fraction, and every operator instinctively works on the numerator. The denominator is half the fraction and it is usually the easier half to move, because a venue that is already open, already staffed and already stocked can serve more people at almost no extra cost of sales.
Which is why it belongs beside the other ratio. If your cost of sales is inside the band and your labour ratio is outside it, the problem is roster shape, not purchasing, and that is covered at what percentage labour should cost in a restaurant. If both are inside the bands and the venue still feels tight, the denominator is the place to look.
This is the part that connects the ratio to the thing sitting on your pass. Take the tax office averages at face value: a small restaurant keeps roughly 65 cents of every sales dollar after cost of sales, and a small cafe about 62 cents. A missed booking does not cost you the food, because you never bought it. It costs you the entire contribution the sale would have made toward rent, wages and everything else, which the same tables put at 79% to 89% of turnover for a small restaurant.
So a A$90 booking that rings out is not a A$90 problem or a A$32 problem. It is about A$58 of contribution that no purchasing improvement will get back for you. The same arithmetic applies to a table that books and does not arrive, which Skai Solutions has costed at what restaurant no-shows actually cost, and it is why an AI receptionist is worth pricing against a cost of sales improvement rather than against the phone bill.
If you want the underlying line cost before any of that, see what a restaurant phone system costs in Australia.
Food cost is one of three lines that decide your margin. Restaurant profit margin in Australia works all three through the ATO small business benchmarks by turnover band, and delivery app commission fees covers the cut that comes off the top before any of them.
Fifteen minutes, your menu, your busiest Friday night.
Book a Free DemoThe ATO small business benchmarks put cost of sales at 32% to 39% of turnover for restaurants turning over A$65,000 to A$500,000, averaging 35%. Above A$2 million the band tightens to 31% to 36%. The figures come from 2023-24 tax returns and were last updated in March 2026.
Higher than a restaurant. The ATO puts cost of sales at 34% to 42% of turnover for coffee shops in the A$65,000 to A$250,000 band, averaging 38%, and 33% to 38% for those above A$600,000. Product mix and lower average transaction values explain most of the gap.
Opening inventory plus purchases minus closing inventory, divided by food sales, times 100. Include or exclude GST on both halves consistently, and count stock on the same day each period so you are comparing the same number of services.
No, and the distinction matters when using the ATO bands. Cost of sales includes everything you bought to sell, so for a licensed venue that means beverage stock as well as food. A dry cafe's cost of sales is close to its food cost. A restaurant with a wine list is not.
The Restaurant Association of New Zealand lists five: portions larger than the costed recipe, waste from over ordering, unexpected ingredient price rises, delivered weights not checked against invoices, and food leaving as staff meals. The first two account for most of it.
Neither. It costs the contribution, because the food was never bought. On the ATO averages a small restaurant keeps about 65 cents in the sales dollar after cost of sales, so a lost A$90 booking is roughly A$58 that no purchasing improvement can recover.