Contractor vs Employee Calculator Australia — FY 2025-26
Compare take-home pay as an employee vs independent contractor. Factor in super (12% SG), GST, leave entitlements, insurance, and hidden costs. See the day rate you need to match an employee package. FY 2025-26 Stage 3 tax rates.
Sham contracting & PSI rules
Sham contracting: If you work for a single client, have fixed hours, cannot subcontract, and the client controls how you do the work, the ATO (and Fair Work) may deem you an employee regardless of your ABN. Penalties apply to the business engaging you. This is increasingly enforced.
PSI (Personal Services Income): If more than 80% of your income comes from one client and you don't pass the "results test" (paid for a result, provide your own tools, liable for defects), your income may be classified as PSI. This limits your allowable business deductions to those an employee could claim.
Source: ATO — ato.gov.au/psi, Fair Work Ombudsman — fairwork.gov.au/sham-contracting.
Try another scenario
How to Use This Calculator
Compare Take-Home tab
Enter your employee gross salary, the equivalent contractor day rate, days worked per year, and whether you are GST registered. The calculator compares net take-home for each option, shows hidden costs as a contractor, and tells you the day rate you need to match the employee package.
True Cost tab
Adds leave weeks (annual + sick + personal), insurance costs, and accountant fees to the comparison. See the employee total package value including super and leave, the contractor billings needed to match, and the break-even day rate accounting for all real-world costs.
ABN Obligations tab
Enter your expected annual turnover and industry. Find out if you must register for GST, how often to lodge BAS, how much super to self-fund, and estimated insurance costs (PI, PL, income protection) for your industry.
Share your result
All inputs are encoded in the URL. Click Share to send your exact calculation to a colleague, accountant, or recruiter.
The Formula
Net = Gross Salary − Income Tax − Medicare Levy (2%)
Employee Total Package:
Package = Gross Salary + Super (12% SG) + Leave Value (weekly pay × leave weeks)
Contractor Net Take-Home:
Net = (Day Rate × Days) − Tax − Medicare − Self-funded Super − Insurance − Accountant
FY 2025-26 Tax Brackets (Stage 3):
$0 – $18,200: 0% | $18,201 – $45,000: 16% | $45,001 – $135,000: 30%
$135,001 – $190,000: 37% | $190,001+: 45%
Equivalent Contractor Rate:
The daily rate where Contractor Net + Super = Employee Net + Super (solved iteratively).
Worked Example
Employee $120K vs Contractor $750/day, 230 days
A common scenario for an IT consultant or business analyst weighing up a contract role.
Employee ($120,000 salary)
Contractor ($750/day)
Verdict: The contractor earns more cash in hand, but after accounting for self-funded super, no leave, and business costs, the contractor needs approximately $800/day to truly match the $120K employee total package. At $750/day, it is close but the employee has more security and entitlements.
Contractor vs Employee Comparison Card
Key differences at a glance
| Parameter | Employee | Contractor |
|---|---|---|
| Tax | PAYG withheld by employer | Self-lodge quarterly (PAYG instalments) |
| Super (12% SG) | Paid by employer on top of salary | Self-fund (no employer obligation) |
| GST | N/A | Register if turnover > $75K |
| Leave | Annual, sick, LSL, parental | None (build into rate) |
| Deductions | Limited (work-related only) | Broad business deductions |
| Insurance | Workers’ comp by employer | Self-fund PI, PL, income protection |
Sources: ATO (ato.gov.au), Fair Work Ombudsman (fairwork.gov.au), ASIC MoneySmart.
FY 2025-26 income tax brackets (Stage 3)
| Taxable Income | Rate | Tax on Bracket |
|---|---|---|
| $0 – $18,200 | 0% | $0 |
| $18,201 – $45,000 | 16% | $4,288 |
| $45,001 – $135,000 | 30% | $27,000 |
| $135,001 – $190,000 | 37% | $20,350 |
| $190,001+ | 45% | Uncapped |
Plus 2% Medicare levy on taxable income. LMITO has expired. Source: ATO (ato.gov.au).
Typical contractor rates by industry (March 2026)
| Industry | Day Rate Range | Employee Equivalent |
|---|---|---|
| IT / Software | $600 – $1,500 | $100K – $220K |
| Management Consulting | $800 – $2,000 | $120K – $280K |
| Finance / Accounting | $500 – $1,200 | $80K – $180K |
| Engineering | $600 – $1,400 | $90K – $200K |
| Creative / Marketing | $400 – $1,000 | $65K – $150K |
Rates are indicative and vary by experience, city, and specialisation. Sources: Hays, Robert Half, Seek.com.au.