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Contractor Pay Calculator 2026–27: Day Rate vs Salary

A contractor rate looks higher than the equivalent salary because it has to pay for your own leave, public holidays, sick days, super and business costs. Enter your rate to see the employee salary it is really worth, the break-even rate for a job offer, and the tax on it in 2026–27.

Updated 2026-10-03 · ATO and official government rates

Unpaid time and costs
Equivalent employee salary$152,232210 billable days · $178,500 invoiced (excl. GST) · take-home $111,792 · 2026–27
Billable days a year210
Day rate$850
Revenue excl. GST$178,500
Less business costs−$8,000
Super you set aside (12% of salary-equivalent)$18,268
Salary-equivalent (taxable)$152,232
Income tax + Medicare$40,441
Take-home$111,792
Break-even day rate vs $130,000 salary$731 ($96.24/h)
GSTRegister – turnover ≥ $75,000; add $17,850 GST to invoices
  • Contractor
  • Employee
Gross (excl. super)
$152,232
$130,000
Super
$18,268
$15,600
Take-home
$111,792
$97,880

Your result is ready

Related

How to compare a contractor rate with a salary

An employee is paid for 52 weeks a year, including annual leave, public holidays and sick days, and their employer pays super on top. A contractor is only paid for the days they invoice. So the first step is to count billable days: 260 weekdays, less the holidays, public holidays, sick days and gaps between contracts you will not be paid for.

With 4 weeks of holiday (the NES annual leave an employee would get), 10 public holidays, 10 sick days (the NES personal leave) and 2 weeks between contracts, you bill 210 days. Public holidays vary by state, so set the number for yours.

Worked example: $850 a day vs a $130,000 salary

At $850 a day for 210 days you invoice $178,500 excluding GST. Take off $8,000 of business costs (insurance, accounting, equipment). If you pay your own super, set aside 12% on top of your "salary" portion: $18,268. What is left, $152,232, is the salary-equivalent. It is taxed at ordinary rates, leaving $111,792 after tax and Medicare.

A $130,000 employee takes home $97,880 and gets $15,600 super plus paid leave. To match that package, the contract needs to pay at least $731 a day ($96.24 an hour over a 7.6-hour day).

Day rate (excl. GST)Revenue a yearSalary-equivalentTake-homeHourly rate
$500$105,000$86,607$68,373$65.79
$650$136,500$114,732$87,498$85.53
$800$168,000$142,857$106,073$105.26
$950$199,500$170,982$123,229$125.00
$1,100$231,000$199,107$139,657$144.74
$1,300$273,000$236,607$159,532$171.05

Super for contractors

The ATO says independent contractors paid mainly for their labour are eligible for the super guarantee, even if they have an ABN. The client calculates 12% on the labour part of the invoice. In that case untick "I pay my own super": the client pays $21,420 on top of the $850 rate in the example, and the whole $170,500 after costs is your salary-equivalent.

If you are not paid mainly for labour, for example you supply significant equipment or run a business with your own clients, you fund your own super. Personal contributions you claim as a tax deduction count towards the $32,500 concessional cap in 2026–27 and are taxed at 15% in the fund.

GST: register once turnover reaches $75,000

You must register for GST when your GST turnover is $75,000 or more. At $850 a day that happens within about 89 billable days. Once registered you add 10% to your invoices ($17,850 a year in the example), lodge business activity statements and pass the GST on to the ATO, so it is not income.

Tax as a contractor: no withholding, so set it aside

A sole trader pays the same individual rates as an employee, but nobody withholds tax from your invoices unless you work through an agency or under a voluntary agreement. You set it aside yourself: about 27% of the salary-equivalent in the example. After your first return showing business income, the ATO will usually put you into quarterly PAYG instalments. The sole trader tax calculator shows the small business income tax offset and quarterly amounts.

Personal services income (PSI) rules

If most of your income is a reward for your personal skills or effort, it is personal services income. Unless you are a personal services business, the PSI rules limit the deductions you can claim and attribute income earned through a company or trust back to you, so you cannot split it with a partner. You self-assess as a personal services business if you pass the results test for at least 75% of your PSI, or pass another test (unrelated clients, employment, business premises) and less than 80% of your PSI comes from one client and its associates.

The results test has three conditions: you are paid to produce a specific result, you supply the equipment or tools needed, and you are liable to fix defects at your own cost. The ATO notes that being paid an hourly or daily rate usually fails the first condition, so many IT, engineering and consulting contractors on day rates are caught by the PSI rules.

Costs to price into your rate

  • Professional indemnity and public liability insurance, often required by the contract.
  • Income protection insurance. As an employee you have paid sick leave; as a contractor you have nothing if you cannot work.
  • Accountant fees, software, a computer and phone, and any training to keep your skills current.
  • Agency margins. If an agency places you, its fee usually comes out of the client rate, not on top of your rate.

Frequently asked questions

What day rate equals a $130,000 salary?

With 4 weeks' leave, 10 public holidays, 10 sick days, 2 weeks between contracts, $8,000 of costs and your own 12% super, about $731 a day before GST (210 billable days).

How do I convert a day rate to a salary?

Multiply the rate by billable days (usually 210–220), take off costs and the super you must fund, and compare what is left with a salary. $850 a day is worth about $152,232 as a salary in the example.

What day rate equals a $130,000 salary?

About $731 a day before GST, once leave, public holidays, sick days, 2 weeks between contracts, $8,000 of costs and 12% super are priced in.

Do contractors get paid super?

If they are paid mainly for their labour, yes: the client must pay 12% super guarantee on the labour component. Otherwise contractors make their own, usually deductible, contributions.

Do I need to charge GST as a contractor?

Only once your GST turnover reaches $75,000 a year. Below that, registration is optional.

Sources

Figures are taken from official government publications and were last reviewed on 2026-10-03.

  1. ATO: Tax rates – Australian resident (Resident tax rates 2026–27 and 2025–26)
  2. ATO: Tax rates – foreign resident (Foreign resident tax rates 2025–26)
  3. ATO: Tax rates – working holiday makers (Working holiday maker tax rates 2025–26)
  4. ATO: Medicare levy reduction for low-income earners (Table: Medicare levy thresholds for a single individual, 2025–26)
  5. ATO: Medicare levy reduction – family income (family taxable income thresholds 2025–26, +$4,338 per dependent child)
  6. ATO: Medicare levy surcharge income, thresholds and rates (MLS income thresholds and rates for 2026–27 and 2025–26)
  7. ATO: Low income tax offset ($700 max; −5c per $1 over $37,500; −1.5c per $1 over $45,000; nil from $66,667)
  8. ATO: Seniors and pensioners tax offset (SAPTO rates and rebate income thresholds for 2025–26; 12.5c per $1 reduction)
  9. ATO: Study and training loan repayment thresholds and rates (Table 1: 2026–27, Table 2: 2025–26)
  10. ATO: Schedule 1 (NAT 1004) – Using a formula (x = whole dollars + 99c; round to nearest dollar, 50c up)
  11. ATO: Personal income tax – new tax cuts for every Australian taxpayer (2026–27 SAPTO thresholds)
  12. ATO: Schedule 15 – Tax table for working holiday makers (Table A: rates for 2026–27, payments from 1 July 2026)
  13. ATO: Schedule 1 – Statement of formulas for calculating amounts to be withheld (NAT 1004), payments from 1 July 2026 – weekly coefficients
  14. ATO: Schedule 1 (NAT 1004) – Withholding amounts sample data, weekly (from 1 July 2026)
  15. ATO: Schedule 8 – Statement of formulas for calculating study and training support loans components (NAT 3539), payments from 1 July 2026
  16. ATO: Key super rates and thresholds – Contributions caps (Table 1.1 concessional, Table 4 non-concessional)
  17. ATO: Understanding concessional and non-concessional contributions (concessional contributions taxed in the fund at 15%)
  18. ATO: Key super rates and thresholds – Division 293 tax (Table 7: $250,000 threshold, 15% rate)
  19. ATO: Key super rates and thresholds – Super guarantee (Table 21 SG %, Tables 23–24 maximum contribution base)
  20. ATO: Key super rates and thresholds – Government contributions (Table 25 co-contribution thresholds; LISTO)
  21. ATO: Low income super tax offset (15% of concessional contributions, max $500, income $37,000 or less)
  22. ATO: Key super rates and thresholds – Transfer balance cap (Table 26)
  23. ATO: Key super rates and thresholds – Payments from super (Table 12 preservation age)
  24. ATO: Key super rates and thresholds – Employment termination payments (Table 17 ETP cap, Table 20 genuine redundancy limits)
  25. ATO: How ETP components are taxed (17%/32% incl. Medicare; $180,000 whole-of-income cap; 45% + 2% above cap)
  26. ATO: How GST works (10% rate)
  27. ATO: Registering for GST ($75,000 / $150,000 non-profit; taxi or limousine travel incl. ride-sourcing regardless of turnover)
  28. ATO: CGT discount (50% individuals and trusts, 33.33% complying super funds, 12-month ownership)
  29. ATO: Tax reform – Reforming negative gearing and capital gains tax (applies from 1 July 2027)
  30. ATO: Changes to company tax rates (25% base rate entity, $50m aggregated turnover, 2021–22 and future years)
  31. ATO: Company tax rates 2025–26
  32. ATO: Instant asset write-off for eligible businesses (Table 1: $20,000, turnover under $10 million)
  33. ATO Small business newsroom: $20,000 instant asset write-off here to stay (permanent from 1 July 2026)
  34. ATO: Small business income tax offset (16%, max $1,000, turnover under $5 million, 2021–22 onwards)
  35. Fair Work Ombudsman: Minimum wage increase starts today (1 July 2025 – $948.00/week, $24.95/hour, casual $31.19)
  36. Fair Work Ombudsman: Minimum wage increase starts today (1 July 2026 – $1,004.90/week, $26.44/hour, casual $33.05)
  37. Fair Work Commission: Annual Wage Review 2026 ([2026] FWCFB 3500, announced 2 June 2026)
  38. ATO: Work out if you have to pay super (contractors paid mainly for their labour are eligible for super guarantee)
  39. ATO: Self-assessing as a personal services business (results test on 75% of PSI, or another test plus the 80% rule)
  40. ATO: PSI results test (paid for a result, supply your own tools, fix defects at your own cost)
  41. Fair Work Ombudsman: Annual leave (4 weeks a year based on ordinary hours; part-time example 20 h → 80 h)
  42. Fair Work Ombudsman: Sick and carer's leave (10 days a year for full-time employees, pro rata for part-time)
  43. Fair Work Ombudsman: Public holidays (differ by state and territory)