How it’s calculated
Labour = hours × hourly cost. Add materials and job overheads, then multiply the combined cost by 1 + markup/100. Apply standard tax to that selling price: NZ 15%, Australia 10%, UK 20%. IRD, ATO and HMRC publish these rates. Margin is gross profit divided by the selling price before tax.
Worked example
16 hours at 55, materials of 800 and overheads of 120 give costs of 1,800. A 25% markup adds 450, giving 2,250 before tax. NZ GST adds 337.50: the customer quote is NZ$2,587.50. The gross margin is 20%, not 25%.
Before you use the result
Use costs excluding recoverable input tax when registered; otherwise use your actual costs and turn tax off. Country changes labels and the standard tax rate, not exchange rates. Defaults are examples, not market labour rates. UK reduced/zero-rated work and domestic reverse-charge construction are outside this standard-rate model. Confirm the correct treatment before issuing an invoice. Include travel, consumables, subcontractors and a contingency in overheads; gross profit is not take-home pay.
Frequently asked questions
Is markup the same as margin?
No. A 25% markup on cost gives a 20% margin on the selling price before tax.
Can I add GST or VAT if I am not registered?
Do not use the tax toggle to imply registration. Select no tax added if you are not registered; confirm the applicable rules with the tax authority.