Salary to Contract Rate Calculator Australia

Why Your Salary Package Doesn't Equal Your Subbie Charge-Out Rate

When you work as a permanent employee in Australia, your base salary is only part of what you actually cost your boss. On top of your weekly wage, your employer covers a stack of mandatory entitlements and business overheads that disappear the moment you grab an ABN and start contracting.

If an employee earns $40.00 an hour on paper, their true cost to the business is closer to $55.00 to $65.00 per hour once superannuation, leave loading, workers compensation, and idle time are factored in. If you jump ship and start subcontracting at $40.00 per hour, you will end up earning far less than minimum wage after paying for fuel, insurance, and tax.

The Real Cost of Running an ABN Trade Business in Australia

To set a profitable contract rate, you need to understand the four major cost buckets that every Australian sole trader must cover out of their own pocket:

1. Employer On-Costs & Superannuation (12.0%)

Under Australian law, employers contribute 12.0% employer super guarantee into your fund. As a subcontractor, you are responsible for making your own super payments. Calculate your required contributions using our Subcontractor Superannuation Calculator to avoid falling behind on retirement savings.

2. Unpaid Leave & Public Holidays

Full-time employees receive 20 days of paid annual leave, 10 days of paid sick/carer's leave, and 11 to 13 paid public holidays every year. That equals 41 paid days off work per year. As a subbie, if you take a day off, your revenue is zero. Your hourly contract rate must build in a cash buffer to pay yourself during holidays and sick weeks.

3. Vehicle, Tools & Equipment Overheads

Running a trade ute or van costs real money. Between diesel, comprehensive vehicle insurance, state registration, logbook servicing, and tyres, a typical work ute costs between $6,000 and $10,000 per year to operate. Calculate your motor vehicle claim using our Cents Per KM Calculator. Add another $2,000 to $4,000 annually for tool replacements, testing tags, ladder racks, and consumables.

4. Non-Billable Hours (Quoting, Driving & Admin)

An employee gets paid for every hour they are on site. A subcontractor spends hours each week driving between sites, picking up supplies at trade suppliers (Bunnings, Reece, Middy's), quoting new jobs, sending tax invoices, and doing quarterly BAS bookkeeping. Typically, 20% to 25% of your work week is non-billable. If you work 40 hours a week, you may only be able to bill clients for 30 hours.

Step-by-Step Example: Converting an $85,000 Salary to a Contractor Rate

Let's walk through a real-world Australian example. Suppose you currently earn an employee salary of $85,000 per year as a qualified electrician or plumber and want to convert to an independent subbie contract rate:

Trade-by-Trade Rate Benchmarks (Australia 2026)

Here is a guide showing typical employee base salaries versus the contract rates subbies should charge in metro areas (Sydney, Melbourne, Brisbane, Perth, Adelaide):

The 1.33x to 1.5x Contractor Conversion Multiplier Formula

As a rule of thumb in the Australian construction and service trades, your minimum contractor charge-out rate must sit between 1.33x and 1.50x of your equivalent employee base hourly wage:

• 1.33x Multiplier (Labour-Only Contracting): Best for subcontracting on commercial sites where the principal contractor supplies materials, plant, and power. Covers 12% superannuation, 4 weeks annual leave, 10 sick days, 11 public holidays, and basic hand tools.
• 1.50x Multiplier (Full Sole Trader Operation): Required when you supply your own trade ute/van, cover commercial public liability insurance ($10M–$20M), pay professional accounting software, and absorb unpaid quoting and driving time.
• 1.75x+ Multiplier (Specialist Services & Emergency): For specialized licensed trades operating custom-outfitted vehicles with heavy diagnostic gear, after-hours call-outs, and significant capital asset depreciation.

Why You Must Divide by Billable Hours (Not 1,976 Hours)

The most common mistake tradespeople make when leaving employment is dividing their annual target income by 1,976 hours (the standard 38 hours × 52 weeks paid to permanent employees).

In reality, independent contractors cannot bill 38 hours every week. After deducting 20 days annual leave, 10 sick days, and 11 public holidays, only 219 actual working days remain. Furthermore, approximately 20% to 25% of that time is consumed by unbillable driving between jobs, supplier visits, customer quoting, and invoicing. This leaves approximately 1,400 billable hours per year. Sizing your rate against 1,400 billable hours ensures your take-home pay matches your desired lifestyle.

Need to verify whether your role legally qualifies as an independent contractor or employee under Fair Work legislation? See our Subcontractor vs Employee Guide & Calculator.