Understanding Cost of Goods Sold (COGS) for Australian Resellers

What Is COGS for Resellers?

Cost of goods sold is what you paid to acquire the items you've sold. For a reseller, this is typically the purchase price of the item plus any direct acquisition costs (like travel to pick it up, or shipping to receive it). COGS is the single biggest factor in determining whether a sale is profitable or not.

If you buy a vintage dress for $12 at an op shop and sell it for $65 on Depop, your COGS for that item is $12. Your gross profit is $53 before platform fees and postage are considered.

COGS vs Expenses: Timing Matters

There's a critical accounting distinction between COGS and operating expenses. Operating expenses (like your monthly Shopify subscription or internet bill) are deducted in the period they occur. COGS, however, is only deducted when the item sells. If you buy 100 items in March but only sell 60 by June 30, only 60 items' worth of COGS is deductible in that financial year. The other 40 items are inventory (a business asset) and carry forward.

This is why the ATO requires you to value your stock on hand at the end of each financial year. It directly affects how much you can deduct.

Tracking COGS Per Item

Most general accounting software doesn't support per-item COGS tracking out of the box. They're designed for businesses that buy in bulk at uniform prices. Resellers buy unique items at varying prices, which means COGS needs to be tracked individually for every single item in your inventory.

The simplest method is a spreadsheet with columns for: item description, date purchased, purchase price, source, date listed, platform listed on, date sold, sale price. When the item sells, the purchase price becomes COGS for that sale. This works for low-volume sellers but becomes unwieldy beyond 50-100 items per month.

Why COGS Tracking Changes Your View of Profitability

Without COGS tracking, you can only see gross revenue. With COGS tracking, you can see actual margin per item, per category, and per platform. This data is transformative for sourcing decisions. If you discover that vintage clothing has an average COGS of 15% (high margin) while electronics have an average COGS of 55% (low margin), that should influence where you spend your sourcing time.

See our guide on P&L for resellers for how COGS feeds into your overall business profitability. For broader bookkeeping practices, visit our reseller bookkeeping guide.