Why a salary divided by 260 is the wrong day rate
There are 260 weekdays in a year. Dividing a $110,000 salary by 260 gives about $423 a day, and that is the number many new contractors quote. It is far too low, because an employee on $110,000 is paid for days they do not work and receives money on top of their salary:
- Super. The super guarantee is 12% of earnings for 2025-26 and 2026-27, paid on top of salary.
- Paid leave. Under the National Employment Standards a full-time employee gets four weeks of annual leave and ten days of personal (sick and carer’s) leave a year.
- Public holidays. The standards name eight national holidays and states add more. Around ten fall on weekdays in a typical year, depending on your state.
- Continuity. An employee is paid between projects. A contractor is not, and the gap between contracts is often several weeks.
- Costs. Professional indemnity and public liability insurance, equipment, software, accounting and training become yours to fund.
This calculator adds all of that back and divides by the days you can actually bill.
A worked example
An employee package of $110,000 plus 12% super, with four weeks of annual leave, ten days of personal leave, ten weekday public holidays, four weeks (20 days) unbilled between contracts and $6,000 of business costs:
- Billable days: 260 − 20 − 10 − 10 − 20 = 200
- Turnover needed: $110,000 + $13,200 super + $6,000 costs = $129,200
- Day rate: $129,200 ÷ 200 = $646 a day excluding GST, or $711 including it
- Hourly, on a 7.6-hour day: $85.00
That is about 1.5 times the $423 you get from dividing by 260. Both figures describe the same standard of living; only one of them pays for it.
Super: who pays it depends on the contract
Most sole-trader contractors fund their own super. But the ATO says a contractor paid wholly or principally for their labour can be owed super by the client even if they have an ABN. The ATO’s own examples contrast an administrative assistant paid by the hour (super payable) with a painter paid to complete a job (not payable).
If your client pays super on top of your rate, choose that option and the calculator leaves super out of the rate. If you are not sure which applies, the ATO’s guidance and a conversation with the client or a tax agent will settle it before you quote.
GST: when to add it
You must register for GST once your business turnover reaches $75,000 a year. At the example rate, turnover is $129,200, well over it. Once registered you add 10% to every invoice and pass it to the ATO through your BAS; it is never your income. Quote the ex-GST rate and show GST separately so there is no confusion about which number was agreed.
The GST collected is not yours to spend. Setting aside one eleventh of every GST-inclusive payment as it arrives keeps the BAS from becoming a cash-flow problem.
Income tax: what to set aside
Because the rate recovers your salary, super and costs, the profit left for you is roughly the salary equivalent. The calculator estimates income tax on it using the ATO’s FY2026-27 resident rates (nil to $18,200, then 15%, 30%, 37% and 45%) plus the 2% Medicare levy. On $110,000 that is $23,520 of income tax and $2,200 of Medicare levy, about 23.4% of the profit.
No one withholds that tax for you. After your first year the ATO will usually put you into PAYG instalments, but until then the whole bill arrives at once. The guide to reserving tax on irregular income covers how to hold it back from every payment.
The estimate leaves out tax offsets, the Medicare levy surcharge if you have no private hospital cover, HELP repayments and the 15% contributions tax inside super. Treat it as a floor to reserve, and confirm the real figure with the ATO or a registered tax agent.
Being honest about unbilled time
The input people most often set too low is the time between contracts. Twenty unbilled days is four weeks a year: one gap between two contracts, or a slow month. Contractors who are finding their first clients, or who work in a slow market, can spend far longer on the bench. Every extra week unbilled raises the rate you need by about 2.5%, so a realistic figure matters more than any other input except the salary itself.
For freelancers who price by the hour rather than the day, or who work outside Australia, the general freelance hourly rate calculator works backwards from the take-home you want.