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Annual Turnover: What Is It and How To Calculate It?

Published on June 5, 2024Updated on April 1, 2025

From cash flow to profitability, there are lots of metrics that can provide a picture of the financial health of your business. Together, these indicators help you understand how you're tracking, what's working, and where there's room for improvement.

Annual turnover is just one of the key markers you can use to get a good idea of how well your business is performing each year. But what exactly is it, and how do you calculate turnover?

Here, we’ll unpack turnover versus revenue, explain the meaning of turnover in business contexts, and show you exactly how to calculate annual turnover using simple, practical examples.

Annual turnover meaning

Annual turnover typically refers to the total income generated by a business over a year. It’s sometimes called 'gross revenue' or 'total sales.'

However, ‘turnover’ doesn’t always refer to sales. Other definitions include:

Annual inventory turnover – measures how many times inventory is replaced over a year.
Annual employee turnover – tracks how many employees leave a business in a year.

For this article, we’re focusing on the most common meaning of turnover: yearly income from sales.

Additional Resource

Need to calculate inventory turnover? Try our inventory turnover calculator for free.

Annual turnover and Australian business taxes

In Australia, annual turnover affects various tax obligations. Understanding these implications can help with tax planning and compliance.

Here's how annual turnover impacts some tax considerations in Australia:

GST Registration: If your business is earning over $75,000, you must register for GST and submit Business Activity Statements (BAS). Registering is easy – find out more information from the Australia Taxation Office (ATO).

Small Business Tax Rate Eligibility: Companies with an aggregated annual turnover under $50 million may qualify for reduced tax rates – this can be significant financial relief for growing businesses. Check your eligibility with the ATO.

Tax Deductions and Concessions: The ATO offers certain concessions based on turnover thresholds, which can help small and medium businesses manage their tax burden more effectively. Get more information here.

PAYG Instalments: Businesses with higher annual turnover may be required to make Pay As You Go (PAYG) instalments to prepay tax obligations. Learn more about PAYG.

Instant Asset Write-Off Eligibility: Small businesses under a specific turnover threshold may qualify for instant asset write-offs and reduce their taxable income. Check your eligibility here.

What's the difference between turnover and profit?

Turnover is a measure of total income from sales, whereas profit is total income minus expenses. Essentially, turnover gives you an idea of your business’s revenue-generating power, while profit reveals how much of that revenue actually contributes to financial growth. A business can have high turnover but still struggle if expenses are too high, making it important to track both metrics closely.

Example

A business sells $100,000 worth of goods in a year. Its annual turnover is $100,000.

After deducting $60,000 in costs (materials, labour, and other expenses), the profit is $40,000.

Annual turnover by industry

The way turnover is measured and assessed can vary significantly across different industries:

Retail: Seasonal fluctuations can dramatically impact turnover calculations. You might experience huge variations between peak and off-peak periods, making it difficult to predict what your annual turnover will be.
Service-based Businesses: Turnover is typically calculated based on billable hours rather than physical product sales, making calculation more complex.
Subscription-based Businesses: In subscription-based models, businesses rely on recurring revenue from customers who pay regularly – often monthly or annually. A key turnover metric here is Annual Recurring Revenue (ARR), which helps measure predictable income over a year.

Construction: Revenue in construction often depends on project completion milestones, so turnover may be reported in stages rather than all at once.

Healthcare: Turnover may include patient billing, insurance reimbursements, and service fees, with revenue fluctuating based on patient volume and insurance processing times.

For more information about how annual turnover is measured in your industry, speak to a professional tax accountant.

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Why annual turnover is important

Annual turnover is an important indicator of your business's performance because it tells you how much money you're bringing in from selling your goods or services. This gives you a picture of your business's overall financial health and can help you keep an eye on your performance indicators:

How your business is currently performing compared to previous years
Whether you're meeting your annual sales targets
The effectiveness of your sales and marketing strategies
How much your business is worth if you're planning to sell

It's also helpful to compare annual turnover against other metrics. For example, if your net profit is low in comparison to your annual turnover, you might want to lower your Cost of Goods Sold (COGS) or other business expenses. Or, if your annual turnover is solid but you don't have much cash on hand, you might look at strategies to improve your cash flow.

How to calculate annual turnover

As long as your accounting records are up to date, calculating annual turnover is as straightforward as adding together your total sales for the year.

The formula

Annual Turnover = Total Sales Revenue for the Year

In simple terms, annual turnover represents the total income your business generates from sales over a 12-month period, without accounting for expenses.

This figure helps assess overall business performance and revenue trends. Consistently tracking turnover allows you to compare yearly growth, spot financial trends and make informed decisions about adjusting business strategies.

Example

For example, let's say a candle making business sells 1,200 candles over the financial year at $12 each.

A simple calculation of annual turnover would be:

1,200 candles x $12 = $14,400

In reality, most annual turnover calculations aren't so simple, because businesses often sell multiple goods and services at different prices. Accounting software like QuickBooks can take care of the more complicated calculations.

How to increase your annual turnover

Want to see bigger numbers on your bottom line? Boosting your annual revenue or turnover doesn't have to be complicated. It's about making smart choices that help you sell more without working twice as hard.

Let's break down some practical ways to boost your sales figures:

Add new products or services: Think about what else your customers might want. If you run a coffee shop, could you add pastries or lunch options? If you're a graphic designer, could you offer social media templates alongside your custom work? Adding complementary items or services means existing customers spend more with you, and you might attract new ones too.

Step up your marketing game: Sometimes people aren't buying simply because they don't know you exist! Invest some time or money in spreading the word. This might mean more social media posts, local advertising or even partnering with ad advertising agencies. Remember to highlight what makes your business special – your unique selling point that sets you apart from competitors.
Create a loyalty program that actually works: Make it worth customers' while to keep coming back. This could be as simple as a punch card (buy 9 coffees, get the 10th free). The key is making rewards attainable and valuable enough that customers actively want to participate.

Get smart with your pricing strategy: Sometimes raising prices actually increases your turnover. If your products or services are priced too low, customers might question their quality. Consider premium options that offer more value at a higher price point.
Explore new ways to sell: Are you only selling in person? Maybe it's time for an online store. Only selling online? Perhaps pop-up events could introduce you to new customers. Look at different channels – wholesale, direct-to-consumer, subscription models. Sometimes the easiest way to increase annual turnover is to make it easier for people to buy from you.

Review your annual turnover with QuickBooks

Managing and tracking your business's financial performance has never been easier. With accounting software like QuickBooks Online, you can automatically record all sales transactions in one place so you always have an overview of your revenue.

You can also generate a customised report in a few clicks to review your annual turnover whenever you need to. QuickBooks Online allows you to automatically record all sales transactions in one centralised platform, giving you real-time insights into your revenue.

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Annual Turnover: What Is It and How To Calculate It?

Annual turnover meaning

Annual turnover and Australian business taxes

What's the difference between turnover and profit?

Example

Annual turnover by industry

Grow Your Business with QuickBooks

Why annual turnover is important

How to calculate annual turnover

The formula

Example

How to increase your annual turnover

Review your annual turnover with QuickBooks

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