Prime cost is cost of sales plus wages, and Skai Solutions puts the Australian restaurant average at about 62.5% of turnover in the A$500,001 to A$2 million band, derived from the ATO's own 2023-24 small business benchmarks.
That matters because the number every operator finds in search is 60%, and 60% is American. On the ATO's published averages the typical Australian restaurant is already past it, and the typical cafe is further past it again. Below is the band for each turnover tier, the arithmetic that produced it, and the reason a target imported from another country sets you up to fail a test you were never going to pass.
Prime cost is the two largest things you actually control, added together and read as a share of sales. What is left of the expense line once prime cost is out is the restaurant overhead line, which the ATO also lets you derive.
For the industry-wide version of the same two lines, measured rather than benchmarked, see average restaurant revenue in Australia, which puts goods at 35.4% of sales and labour at 30.4% across 2024-25. Everything else, rent, power, insurance, software, accounting, is overhead and is largely fixed in the short run. That is the whole reason the industry watches prime cost rather than total expenses: it is the part a week of better decisions can move. Our pages on restaurant food cost percentage and restaurant labour cost percentage break down each half on its own. This page is about what happens when you read them together.
The ATO publishes small business benchmarks built from lodged 2023-24 tax returns, and its restaurants benchmark gives both halves of prime cost separately. The ATO does not publish prime cost. The addition below is ours.
| Turnover band | ATO average cost of sales | ATO labour range | Derived prime cost band |
|---|---|---|---|
| A$65,000 to A$500,000 | 35% | 18% to 30% | 53% to 65% |
| A$500,001 to A$2,000,000 | 35% | 23% to 32% | 58% to 67% |
| Over A$2,000,000 | 34% | 27% to 34% | 61% to 68% |
Read the direction of travel, because it is the opposite of what most operators expect. Prime cost rises with turnover in Australian restaurants. Cost of sales barely moves, 35% down to 34%, while the labour floor climbs eleven points from 18% to 27%. Scale buys you almost nothing on purchasing and costs you a great deal on staffing, because a A$3 million venue cannot be run by an owner and a cousin.
Higher again, and for a reason worth knowing before you compare yourself to a restaurant. The ATO's coffee shops benchmark excludes carts, vans and mobile coffee retailers, so this is fixed-premises cafes.
| Turnover band | ATO average cost of sales | ATO labour range | Derived prime cost band |
|---|---|---|---|
| A$65,000 to A$250,000 | 38% | 21% to 32% | 59% to 70% |
| A$250,001 to A$600,000 | 38% | 21% to 32% | 59% to 70% |
| Over A$600,000 | 36% | 27% to 35% | 63% to 71% |
A cafe's cost of sales runs three points above a restaurant's at every tier. Coffee is bought at a wholesale price set by a roaster and sold at a price set by the shop two doors down, which leaves very little room to engineer the margin. A restaurant can move a A$4 plate of pasta to A$26; nobody moves a flat white to A$26. That is why cafe advice built on restaurant menu engineering does not land.
The 60% prime cost target is genuine and it is useful, but it was set in a different labour market. Named accounting sources describe roughly 60% of food and beverage sales as the level a sustainable restaurant runs at; the accounting firm Baker Tilly discusses prime cost targets in exactly those terms.
Australia's labour half is structurally larger, and none of the reasons are things an operator can fix with a roster.
So when an operator reads "keep prime cost under 60%" and measures 64%, the honest conclusion is usually not that the venue is badly run. It is that the benchmark was never Australian. The ATO's own averages are the comparison that means something, and the ATO is explicit that sitting outside a range is not proof of a problem, only a reason to look.
Weekly, not monthly. A monthly prime cost is an average of four weeks and it hides the one that went wrong, which is the only week you could have acted on.
A suburban restaurant does A$18,000 in sales excluding GST in a week. Stock movement gives cost of goods sold of A$6,300. The pay run is A$4,600 in wages, plus A$552 of superannuation at 12% and A$180 of workers compensation, so A$5,332 of labour.
Against the American 60% that reads like a failing venue. Against the ATO's 58% to 67% band for its turnover tier it is unremarkable, sitting in the upper half. The arithmetic is ours and the bands are the ATO's; your own accounts are the only authority on your own venue.
Cheapest first, which is also roughly most effective first.
Not at this level of detail, and this page will not invent one. There is no Stats NZ or IRD equivalent of the ATO small business benchmarks that publishes cost of sales and labour as shares of turnover for cafes and restaurants. The closest published figure is the Restaurant Association of New Zealand's 2025 Hospitality Report, which puts wage costs at about 40% of hospitality revenue across the sector. That is one half of prime cost, on a different definition, across a wider set of businesses including bars and accommodation.
Borrowing the Australian bands for a New Zealand venue would be wrong in both directions: there are no penalty rates or modern awards in New Zealand, but the adult minimum wage is NZ$23.95 an hour from 1 April 2026 and there is no tipping culture either. Use your own numbers and the association's wage figure as the only sanity check that is actually about New Zealand. Our page on hospitality wages in New Zealand sets out the rates.
Prime cost behaves differently on a function than it does in the dining room, because the food is bought for a guest count that moves and the labour lands on a weekend. Our page on how much to charge for catering prices a job from the ATO's published catering band rather than from a food cost multiplier.
Very little directly, and it would be dishonest to pretend otherwise. Prime cost is stock and wages; a phone call is neither. The connection is on the sales side of the fraction. Prime cost is a percentage, so every booking that lands without adding a labour hour improves it, and every hour of labour spent on something that is not sales makes it worse.
That is the only claim worth making. A venue at 64.6% prime cost does not get to 60% by answering the phone better. It gets a slightly better denominator, and it stops paying award rates for a supervisor to stand at a handset during service. If your phone mostly carries enquiries rather than orders, a basic message-taking plan is the right buy and it is not us. Where an AI receptionist earns its place is a venue whose phone carries bookings and orders it is currently dropping, which our page on the cheapest way to answer a restaurant phone prices honestly against the alternatives.
Where the machine sits in your capital stack changes the fixed half of this number. Coffee machine lease or buy for an Australian cafe compares buying, equipment finance, rental and a roaster supplied machine, with the bean premium priced out.
The cost of sales half of prime cost includes beverage, which is why no Australian source publishes the two separately. See beverage cost percentage for an Australian restaurant for the venue type ranges and the method for measuring your own.
Prime cost is the whole-venue number. The item level method for deciding which dishes are carrying it is menu engineering, including the 70% of average volume threshold the original model uses and that the published four box grids leave out.
Prime cost tells you what the plate consumes. Break even tells you how many plates you need before any of it is yours. Our page on how to work out a restaurant break even point splits the ABS 94.4% expense ratio into its fixed and variable halves and turns it into a covers per day number.
On the ATO's published small business benchmarks for 2023-24, an Australian restaurant turning over A$500,001 to A$2 million ran average cost of sales of 35% and labour of 23% to 32% of turnover. Adding those gives a prime cost band of about 58% to 67%, centred near 62.5%. That is Skai Solutions' arithmetic on the ATO's averages, not an ATO figure, and it is higher than the 60% target that comes out of American restaurant accounting.
Prime cost equals cost of goods sold plus total labour, divided by sales, expressed as a percentage. Cost of goods sold is opening stock plus purchases minus closing stock. Total labour means wages, on-costs, superannuation and payroll tax, not just the gross hourly rate on the roster.
Close, but not identical for a licensed venue. Cost of goods sold covers everything you buy to sell, so beverage, coffee beans and packaged retail stock sit inside it alongside food. A venue with a strong bar can have a low food cost percentage and still carry a high prime cost.
Usually not. For a sole trader or partnership the owner's own labour is generally not an expense in the lodged return the ATO built its benchmarks from, so the labour share, and therefore the derived prime cost, understates what an owner-operated venue really consumes. Add a market wage for yourself before you compare.
No published one at this level of detail. The closest figure is the Restaurant Association of New Zealand's 2025 Hospitality Report, which puts wage costs at about 40% of hospitality revenue. Pair that with your own cost of sales rather than borrowing the Australian bands, because the wage structures are not comparable.
Measure it weekly before you change anything. A monthly figure is an average of four different weeks and hides the one that went wrong. Once you can see it weekly, the usual order is portion control and stocktake accuracy first because they cost nothing, then rostering against actual trade, then menu price.
Related: sales per labour hour, which breaks the labour half of prime cost down to a number you can check shift by shift.