Subcontractor vs Employee Calculator Australia

An employee works under direct supervision, uses the employer’s tools, and follows set hours. A subcontractor (subbie) operates under their own ABN, controls how and when the work gets done, provides their own equipment, and invoices for completed work. The ATO uses a multi-factor test to determine which category applies — the written contract alone does not decide it.

A subcontractor needs to charge between 30% and 50% more than an equivalent employee hourly rate. This premium covers superannuation you must pay yourself, unpaid leave and sick days, business insurance, vehicle running costs, tool maintenance, and the admin time spent on invoicing and BAS lodgments.

Generally no. As a subcontractor working under your own ABN, you are responsible for paying your own super. However, if the ATO classifies you as an employee for super purposes (mainly if you are paid wholly or principally for your labour), the hiring business may be required to pay super on your behalf at the current 12% rate.

Sham contracting is when a business treats a worker as a contractor to avoid paying employee entitlements like super, leave, and workers compensation — even though the working arrangement is really employment. This is illegal under the Fair Work Act. Businesses can be fined, and affected workers may be owed back-pay, super, and leave entitlements.

You must register for GST and charge 10% on all invoices if your annual business turnover reaches or exceeds $75,000. If your turnover is below $75,000, GST registration is optional. Once registered, you must lodge a Business Activity Statement (BAS) quarterly or monthly to report and remit the GST you have collected.

You can register for an ABN for free through the Australian Business Register (ABR) website at abr.gov.au. The process takes about 10 minutes online. You will need your Tax File Number (TFN), personal identification details, and information about your business structure (sole trader, partnership, or company).

At minimum, most subbies need Public Liability Insurance (typically $5 million to $20 million cover). Many clients and principal contractors require this before you step on site. Depending on your trade and risk level, you should also consider Income Protection Insurance, Professional Indemnity Insurance, and Tool and Equipment Insurance.

Subcontractors can claim a wide range of business deductions that employees cannot. Common claims include work vehicle expenses (fuel, rego, servicing, finance), tool purchases and repairs, protective clothing and boots, mobile phone and internet, trade-specific software and apps, insurance premiums, home office costs, and professional development or trade courses.

If more than 80% of your contractor income comes from a single client, the ATO may classify it as Personal Services Income. This restricts the range of business deductions you can claim — for example, you cannot deduct home office costs, and you cannot split income with a spouse or through a company structure. The PSI rules are designed to prevent disguised employment arrangements from receiving contractor tax benefits.

A realistic figure is between 1,200 and 1,400 billable hours per year. Start with 48 working weeks (after deducting 4 weeks of leave). Subtract 10 sick/carer days and 11 public holidays, giving roughly 219 workdays. Multiply by 8 hours, then reduce by 20% for non-billable time (driving, quoting, invoicing, bookkeeping). This gives approximately 1,400 billable hours — far less than the 1,976 gross hours most employees get paid for.

No. As a subcontractor, you are not entitled to any paid leave — no annual leave, no personal or sick leave, and no public holidays. If you take a week off, that is a week of zero income. This is why your hourly rate must be high enough to cover these unpaid periods throughout the year.

Your invoice must include your business name, ABN, the date of issue, a description of services performed, the amount charged, and whether GST is included. If you are registered for GST, your invoice must state "Tax Invoice" and show the GST amount separately. Use our free invoice generator to create compliant invoices in under two minutes.

It depends on your situation. Subcontracting offers higher earning potential, tax deductions, and schedule flexibility — but it also means no paid leave, no job security, and more admin work. If you have a reliable pipeline of work, own your tools and vehicle, and have priced your rate correctly using a calculator like this one, going subbie can increase your gross income by 20% to 40%.

There is no single answer because it depends on your target income, business costs, and billable hours. However, as a general benchmark, most trade subbies in metro areas of Australia need to charge at least $70 to $90 per hour excluding GST just to match a mid-range employee salary of $70,000 to $80,000 after covering all overheads. Use the calculator above to find your specific minimum rate.

Yes. Many tradies work a regular employed job during the week and take on subcontract work on weekends or after hours. You will need to register a separate ABN for your subcontracting income, keep separate records, and lodge a tax return that declares both your employment income and your business income. Be mindful of any non-compete clauses in your employment contract.