A profit and loss statement answers one question: did the business make money over a period, and why? Banks ask for it, your accountant builds your tax return from it, and it is the quickest way to spot a job, product or cost that is dragging you down.
This guide gives you a ready-to-copy P&L template layout, explains each line including cost of goods sold, and shows how GST-exclusive figures feed into your BAS and your 2025-26 tax return. Rules were checked against the ATO’s myTax 2026 business income instructions, its GST accounting method guidance and the Simpler BAS bookkeeping guide.
It suits sole traders, partnerships and small company owners preparing their own figures. For a broader explanation of what a P&L shows and how to read it, see our profit and loss statement guide.
Key takeaways
- P&L structure: revenue – cost of goods sold = gross profit, then gross profit – operating expenses = net profit.
- If you are GST-registered, keep the P&L GST-exclusive. GST collected is owed to the ATO, not income.
- COGS for stock businesses = opening stock + purchases – closing stock.
- Drawings are not an expense. They reduce owner’s equity, not profit.
- Businesses with aggregated turnover under $10 million can choose cash or non-cash (accruals) GST accounting.
P&L template at a glance
| Line | What goes in it | GST-registered treatment |
|---|---|---|
| Revenue | Sales of goods and services, other business income | Exclude GST collected |
| Less: cost of goods sold | Opening stock + purchases – closing stock; direct materials | Exclude GST credits claimed |
| = Gross profit | Revenue minus COGS | Calculated |
| Less: operating expenses | Rent, wages, super, insurance, advertising, bank fees, depreciation | Exclude claimable GST |
| = Net profit (loss) | Gross profit minus operating expenses | Calculated |
| Not on the P&L | Drawings, GST payable, loan principal, asset purchases | Balance sheet items |
Source: ATO myTax 2026 net income or loss from business, ATO choosing a GST accounting method, checked 9 October 2026.
What goes into each section of the template?
Revenue
The top line is everything the business earned from its activities: sales, service fees, commissions and other business income. The ATO’s myTax instructions list other business income as including sales, service earnings, royalties, subsidies, bad debts recovered and profits on sale of depreciating assets.
Cost of goods sold
COGS is the direct cost of what you sold. For a business that holds stock, it is opening stock plus purchases minus closing stock. Service businesses may include direct materials or subcontractor labour here. The ATO asks for a closing stock valuation method (cost, market selling price or replacement value), and small businesses may be able to use the simplified trading stock rules.
Operating expenses
These are the costs of being in business whether you sell one item or a thousand. The ATO’s categories are a sensible template: contractor and subcontractor expenses, super for staff, lease expenses, rent, interest, depreciation, motor vehicle expenses, bad debts, repairs and maintenance, and all other expenses such as professional fees and advertising. Super guarantee for employees is 12% for 2025-26 and 2026-27.
Net profit or loss
Gross profit minus operating expenses. For a sole trader, this net figure flows into the individual tax return. Our sole trader tax deductions guide covers what can be claimed.
Should your P&L show GST?
If you are registered or required to be registered for GST, the ATO says to exclude GST from your income and deductions. The 10% you collect on taxable sales is a liability to the ATO, and GST on business purchases is usually claimed back as a credit. If you are not registered for GST, you claim the GST-inclusive amount you paid on business expenses.
Timing matters too. Under the cash basis, you report GST when payment is received or made. Under the non-cash (accruals) basis, you report it when the invoice is issued or received, or payment is made, whichever is first. Businesses with aggregated turnover under $10 million can choose either.
How does your P&L connect to your BAS and tax return?
Your BAS does not ask for a P&L, but the same transactions drive both. Under Simpler BAS you report total sales at G1, GST on sales at 1A and GST on purchases at 1B. The ATO’s G1 instructions allow GST-inclusive or GST-exclusive figures depending on your method, so be consistent. Some P&L items, such as wages, depreciation and bank fees, are out of scope for GST. Our activity statement guide walks through each label, and our BAS and GST lodgement service can prepare it for you.
At tax time, the P&L becomes the business schedule. Sole traders complete the net income or loss from business section in their return, which uses the same income and expense categories. If you also work as an employee, your wages come through your income statement separately. We prepare sole trader tax returns from your P&L and records.
| P&L line | BAS | Tax return |
|---|---|---|
| Sales (GST-exclusive) | G1 total sales; GST at 1A | Other business income |
| Purchases and COGS | GST credits at 1B | Cost of sales (opening stock, purchases, closing stock) |
| Wages | W1 and W2 if you withhold PAYG | Salaries and wages |
| Depreciation | Not reported for GST | Depreciation expenses |
| Bank fees | Not reported for GST | All other expenses |
Source: ATO Simpler BAS bookkeeping guide, ATO myTax 2026, checked 9 October 2026.
Worked example: a GST-registered retailer for 2025-26
Sales for the year are $180,000 excluding GST. The $18,000 GST collected (10% of $180,000) is reported on the BAS and paid to the ATO, so it stays off the P&L.
COGS: opening stock $20,000 + purchases $95,000 – closing stock $25,000 = $90,000. Gross profit = $180,000 – $90,000 = $90,000 (a 50% gross margin).
Operating expenses: rent $24,000 + casual wages $18,000 + super $2,160 (12% of $18,000) + advertising $4,000 + insurance $2,500 + bank fees $840 + depreciation $3,000 = $54,500.
Net profit = $90,000 – $54,500 = $35,500. The owner’s $30,000 of drawings during the year do not change this figure; they reduce owner’s equity on the balance sheet instead.
Rule of thumb: If an amount is GST, a loan repayment, an asset purchase or money you took for yourself, it does not belong on the P&L as income or an expense.
Template or software?
A spreadsheet template works for a new or very small business with few transactions. Once you have bank feeds to reconcile, a BAS each quarter or staff to pay, accounting software is usually faster and less error-prone. We offer Xero training and setup and MYOB training and setup if you are moving off spreadsheets.
Read the P&L alongside your balance sheet and cash flow. Profit is not cash, and a profitable business can still run short when BAS or super is due. Our guide to equity in accounting explains how profit flows into the balance sheet, and our financial management and reporting team can prepare monthly reports for you. For small companies, ASIC says a financial report usually only needs preparing if shareholders request one, ASIC directs it, or special rules apply.
Common mistakes on a profit and loss statement
- Including GST in sales: GST-registered businesses overstate income by 10% of taxable sales.
- Mixing COGS with operating expenses: your gross margin becomes meaningless.
- Recording drawings as wages: sole trader drawings are not deductible.
- Expensing asset purchases in full: equipment is generally depreciated unless a concession applies.
- Switching between cash and accruals: pick a method and stay consistent across periods.
FAQ about profit and loss statement templates
Should my profit and loss statement include GST?
If you are registered for GST, keep your P&L GST-exclusive. GST you collect on sales belongs to the ATO and GST on purchases is usually claimed back as a credit, so neither is income or an expense. The ATO’s myTax instructions say GST-registered businesses exclude GST from income and deductions. If you are not registered, record expenses at the amount you actually paid.
What is the difference between COGS and operating expenses?
Cost of goods sold covers the direct cost of what you sell, usually opening stock plus purchases minus closing stock, and sometimes direct materials or subcontract labour. Operating expenses are the costs of running the business regardless of sales volume, such as rent, insurance, advertising and bank fees. Separating them is what lets you calculate an accurate gross profit margin.
Can I use my P&L to complete my BAS?
Your P&L helps, but it is not a BAS on its own. The BAS reports total sales at G1 and the GST amounts at 1A and 1B, and some items on your P&L, such as wages, depreciation and bank fees, are not reported for GST. Use your P&L to check that sales and expenses for the quarter look right, then run the GST report from your records.
Are owner drawings an expense on the P&L?
No. Money a sole trader takes out for personal use is drawings, which reduces owner’s equity on the balance sheet but is not a business expense. Including drawings as wages understates your profit and overstates deductions. Company directors are different: wages or director’s fees paid by a company can be a business expense, subject to the usual payroll obligations.
Do small companies have to lodge their P&L with ASIC?
Generally no. ASIC says most small proprietary companies only prepare a financial report if shareholders request one, ASIC directs it, or special rules apply. A small company still needs an accurate P&L to complete its company tax return and to decide on dividends, so the work is needed whether or not anything is lodged with ASIC.
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Nanak Accountants can set up your P&L, keep it GST-correct and turn it into your BAS and tax return. Call 1300 626 258 or ask about our monthly financial reporting.
This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO myTax 2026 business income instructions, GST accounting method, Simpler BAS, trading stock and super guarantee pages, and ASIC small proprietary company guidance on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
