Contractor Calculator Australia

Converting a day rate or hourly rate to annual income

A day rate becomes an annual figure by multiplying the rate by the days you work each week and the weeks you actually work each year. The weeks figure is the part people usually get wrong. A full-time employee is paid for annual leave and public holidays; a contractor is not. Using 52 weeks overstates contractor income unless you genuinely invoice every week.

Annual income = day rate × days per week × weeks per year. For hourly work, replace the day rate and days with the hourly rate and hours per week.

An $800 day rate across five days and 46 weeks is $184,000. Across 52 weeks it is $208,000, a difference of $24,000 for the same rate. The correct figure depends on how many weeks you can realistically invoice, not on the calendar. Many contractors use 44 to 48 weeks once public holidays, sick days, annual leave and quiet periods are counted.

ABN contractor vs PAYG employee

The same headline rate is worth different amounts depending on how you are engaged. A PAYG employee usually receives 12% super on top of salary, paid annual and personal leave, public holidays, workers’ compensation cover and tax withheld from each pay. An ABN contractor receives none of those by default and must fund them from the rate.

• Super: 12% of salary for a PAYG employee, usually nothing from a client for an ABN contractor.
• Leave: four weeks of annual leave and ten days of personal leave for a full-time employee; unpaid time off for a contractor.
• Tax: withheld each pay for an employee; self-assessed and paid through the return or PAYG instalments for a contractor.
• Risk: an employee has more income security; a contractor carries downtime, bad debts and insurance costs.
• Control: a genuine contractor controls how, when and where the work is done. If the arrangement looks like employment, the ATO may treat it differently.

A common rule of thumb is that a contractor rate needs to be 25% to 40% higher than an equivalent salary to cover super, leave and business costs. The exact gap depends on your expenses, how many weeks you work and the value of the benefits you give up.

GST registration for contractors

Once your GST turnover reaches $75,000 in a 12-month period, you must register for GST. Taxi and ride-share drivers must register from their first dollar. Registration means you charge 10% GST on taxable sales, lodge a business activity statement and remit the net GST to the ATO. You can claim credits for the GST included in business purchases.

GST is not part of your income. If you invoice $10,000 plus GST, you collect $11,000, keep $10,000 as revenue and hold $1,000 for the ATO, less any credits. The calculator shows the GST separately so it is not mixed into your taxable income or take-home pay. Registering can improve your cash flow if your clients are GST-registered businesses, but it adds administration and record-keeping.

If you are not registered, you cannot charge GST and should not show it on invoices. You also cannot claim GST credits on purchases. TheGST calculator works out the inclusive and exclusive split for any invoice.

Tax and cash flow as a contractor

Nothing is withheld from an ABN invoice, so the tax estimate in the calculator is money you need to keep. Put a proportion of each payment aside, ideally in a separate account, and review it quarterly. The ATO may enter you into the PAYG instalment system, which collects tax in quarterly amounts based on your last assessed income.

Contractors can also claim business expenses that employees cannot, which reduces taxable income. Equipment, software, insurance, home-office costs, travel between clients and professional fees are common examples. The calculator shows income before expenses, so your actual taxable income may be lower than the annualised figure.

Day rate examples

Each row assumes five days a week, 46 weeks a year, a 2026–27 resident taxpayer with the tax-free threshold and the Medicare levy, no HELP, no business expenses and no GST. “After tax” is before super, which a PAYG employee would receive on top.

Change the weeks, days and engagement type in the calculator above for a figure that matches your contract. A PAYG comparison adds super and leave but withholds tax during the year.

Comparing an ABN rate with a salary package

To compare fairly, add the value of super, leave and benefits to the salary, then subtract the contractor’s business costs from the ABN income. If a salary is $120,000 plus 12% super, the package is worth about $134,400 before leave and other benefits. An ABN rate that produces $150,000 but requires $15,000 of expenses and four weeks of unpaid leave is closer than the headline numbers suggest.

Use the salary calculator to see the take-home pay on an equivalent salary, and thesuper projection calculator to see what contributions are worth over time. If you are weighing a second income stream, the second job tax calculator shows how it stacks on top of your main income.