Contractor vs Employee Calculator Australia
See what an ABN day rate is really worth next to a PAYG salary for 2026-27, once self-funded super and unpaid leave are priced in, plus the legal test for who actually counts as a contractor.
Contractor vs Employee Calculator 2026-27
How does the like-for-like comparison work?
Two costs are subtracted as hard dollars. Everything else is priced through your own billable days.
The calculator starts with gross contract income: your rate multiplied by the billable days or hours you actually expect to invoice, not the days in the calendar. That gross goes through the same 2026-27 resident tax scale as every other page here, income tax less the low income tax offset, plus the 2% Medicare levy, to give net cash in hand. Up to this point, the number is identical to what the contractor pay calculator would show you.
From that net cash, two costs come off as hard, dated figures. The first is 12% self-funded super, the amount an employer pays on top of a salary that a contractor has to set aside from their own invoice to have the same retirement outcome. The second is the cash value of 4 weeks of annual leave, the National Employment Standards entitlement (Fair Work Act 2009 ss86-87) that an employee is paid for and a contractor simply is not, valued at your own day rate. What is left is the like-for-like value, the headline figure on this page.
Personal leave, public holidays and the downtime between contracts are real costs too, and this page shows what they are worth at your rate, but they are not subtracted from the headline. They vary by state, by industry and by how quiet your pipeline runs in a way super and annual leave do not, so folding a fixed national figure into the total would manufacture false precision. Instead, they live in the one input that actually reflects your situation: billable days. Fewer billable days already means less gross income, which is the honest way those costs show up.
Why isn’t a $100,000 contract worth the same as a $100,000 salary?
Because the same headline number carries a different set of obligations on each side of it.
Run $100,000 through both columns and the tax is identical, because a contractor’s profit and an employee’s salary are taxed on the same 2026-27 resident scale. The employer side of a $100,000 salary adds 12% super on top, worth $12,000, and pays the employee in full through 4 weeks of annual leave, 10 days of personal leave and every public holiday. A $100,000 contract at 200 billable days funds none of that automatically. It is one number that has to cover your take-home pay, your own super, and every day you do not bill.
That is the whole reason this calculator exists. A day rate and a salary answer different questions: one is what a client will pay for a day of your time, the other is a package an employer assembles including retirement savings and paid time off. Comparing the two raw numbers side by side, as many rate calculators do, answers neither question. Source: ATO, Working as an independent contractor (QC43442), updated 5 June 2026, on the entitlements a contractor does not receive.
Why does the number of billable days matter more than the rate?
Because it swings the like-for-like value further than almost any rate negotiation will.
At a fixed $500 day rate, the table below moves only one thing: how many days a year you actually bill. Nothing about your skill, your rate or your negotiating position changes. The like-for-like value still falls by $22,400 from the top row to the bottom.
| Billable days a year | Gross contract income | Net cash in hand | Like-for-like value | Gap vs a $100,000 salary |
|---|---|---|---|---|
| 220 | $110,000 | $84,280 | $61,080 | $28,400 |
| 200 | $100,000 | $77,480 | $55,480 | $34,000 |
| 180 | $90,000 | $70,680 | $49,880 | $39,600 |
| 160 | $80,000 | $63,880 | $44,280 | $45,200 |
| 140 | $70,000 | $57,080 | $38,680 | $50,800 |
Day rate fixed at $500 in every row, 2026-27 resident scale, no HECS-HELP. Each row self-funds 12% super and 4 weeks of annual leave at that row’s own gross. A 260-weekday working year (52 weeks × 5 days) is the arithmetic reference; the gap between that and your billable days is annual leave, public holidays, personal leave and downtime combined.
What day rate actually matches a salary?
More than the raw uplift suggests, once you also fund your own super and your own leave.
A common shortcut is to add a flat percentage to a salary and call it a day rate. It understates the gap, because it usually prices super alone and ignores that a contractor is paid for fewer days a year than an employee. Solving properly, at 200 billable days a year, a $100,000 salary (worth $89,480 with super) needs about $180,900 of contract income, roughly $904.50 a day, to genuinely match it.
| Employee salary | Employee total value | Contract income to match | Day rate at 200 billable days | Uplift on the salary |
|---|---|---|---|---|
| $60,000 | $57,580 | $104,600 | $523 | 74.3% |
| $80,000 | $73,480 | $139,900 | $699.50 | 74.9% |
| $100,000 | $89,480 | $180,900 | $904.50 | 80.9% |
| $120,000 | $105,480 | $230,200 | $1,151 | 91.8% |
| $150,000 | $128,430 | $304,200 | $1,521 | 102.8% |
Contract income solved in $100 steps on the 2026-27 resident scale until the like-for-like value (net cash, minus 12% self-funded super, minus 4 weeks of self-funded annual leave) reaches the employee’s total value. Personal leave, public holidays and downtime are not priced into this table; a genuinely equivalent rate needs to run higher again to cover them, which is what the calculator above lets you test against your own billable days.
What does an employee get that a contract rate has to fund itself?
Six items, and the rate almost never mentions any of them.
| Item | Employee | Contractor |
|---|---|---|
| Superannuation | 12% paid by the employer, on top of salary | Self-funded from the rate, unless the labour-only SG rule applies |
| Paid annual leave | 4 weeks a year, NES minimum | None |
| Public holidays | Paid, whether worked or not | Unpaid if the day is not billed; the count varies by state |
| Paid personal and carer’s leave | 10 days a year, NES minimum | None |
| Downtime between engagements | Paid; the employer carries the bench cost | Unpaid; the contractor carries the bench cost |
| GST, BAS and PAYG instalments | Handled by the employer’s payroll | Self-managed, generally quarterly, an administrative cost in time or fees |
Sources: ATO, Working as an independent contractor (QC43442), updated 5 June 2026; Fair Work Act 2009 ss86-87 (annual leave); ATO, Super for independent contractors (QC33854), updated 29 April 2026. Public holiday dates are declared by each state and territory, so this page does not assume one national count.
Am I actually a contractor, or an employee with an ABN?
Since March 2022, the written contract is the primary evidence, considered as a whole, not a checklist.
The High Court’s decisions in Personnel Contracting Pty Ltd v McCourt [2022] HCA 13 and Jamsek v Macedonian Orthodox Community Church St Demetrius Inc [2022] HCA 12, both decided 3 March 2022, replaced the old multi-factor checklist. The ATO’s ruling on the change, TR 2023/4, states the approach plainly: “the terms of the contract between the parties must be considered holistically to determine whether, on balance, the worker is an employee or independent contractor.” The written contract is now the primary evidence, provided it is genuine and not a sham.
The individual factors still matter, they are just no longer a scorecard where the highest count wins.
| Factor | Points toward employee | Points toward contractor |
|---|---|---|
| Mode of remuneration | Paid for time worked, or an ongoing engagement | Paid a fixed fee to achieve a specific result |
| Ability to delegate | No right to send someone else to do the work | A genuine, exercisable right to subcontract or delegate |
| Tools and equipment | Hirer provides them, or reimburses the worker | Worker provides and funds their own |
| Commercial risk | Little or none; the hirer wears the cost of a defect | Bears the cost of fixing their own defective or late work |
| Goodwill generated | Builds the hirer’s business, not the worker’s own | Builds the worker’s own business |
A worker can show every contractor trait in this table and still be an employee if the contract is drafted to disguise an employment relationship. Sources: ATO, Difference between employees and independent contractors (QC64491); ATO, TR 2023/4, published 11 December 2024.
This page does not decide your employment status, and nothing here is legal advice on it. The ATO publishes its own employee/contractor decision tool, built to apply these tests to your specific facts. Use it, or a registered tax agent or employment lawyer, before relying on a label in a contract.
Could I be owed super even while genuinely contracting?
Yes, if you are paid mainly for your labour and cannot delegate the work.
Superannuation guarantee runs on its own test, independent of the employment status question above. If a contract is mainly for your labour by dollar value, pays you for your personal service rather than a specified result, and does not let you delegate the work to someone else, the hirer owes 12% of the labour component to a super fund, on top of your invoice, and it does not matter that you hold an ABN.
This changes the arithmetic on this page if it applies to you. The calculator above assumes you self-fund the full 12%, because that is the honest default for a genuine contractor. If you meet the labour-only test, some or all of that self-funded super line is not yours to carry, it is money you are separately owed. The three-limb test, with the ATO’s own worked examples, is set out in full on the contractor pay calculator. Confirm your own status against it before assuming the full gap on this page is real.
What is sham contracting, and why does it matter here?
Calling an employment relationship a contract does not make the obligations disappear. It defers them.
Sham contracting is engaging someone as a contractor when the facts, full-time hours, a set location, tools provided, ongoing day-to-day control, no real right to delegate, describe an employee. The label in the paperwork does not settle it, and cannot, once the substance points the other way. Where a sham is found, the consequences reach backwards rather than starting from the date it is discovered.
For the hirer, that can mean liability for PAYG withholding that was never withheld, and superannuation guarantee for the whole misclassified period, with interest and an administrative penalty on top. For the worker, it can mean years of tax returns to sort out, income that was never taxed the way it should have been, and a scramble to work out what was actually owed. Exact penalty amounts are set case by case and are genuinely not something a calculator should state as a figure. If any of the facts above sound like your situation, that is a conversation for the ATO, Fair Work, or an employment lawyer, not a number this page can give you.
Does personal services income change this comparison?
It can, but it is a separate question from the one this page answers.
If more than half the value of your contract is for your own skills, labour or expertise, that income is personal services income. Whether you pass the personal services business tests then decides if you can claim full business deductions or split the income through a company or trust to a lower-taxed associate. Getting this wrong is the single most common reason a “contract through a company and save tax” plan fails.
This calculator assumes a straightforward sole trader with no PSI structuring, the same assumption the contractor pay calculator uses, where the PSI rules, the results test and the other personal services business tests are covered in depth. If your income might be PSI and you are considering a company or trust, that decision belongs with a registered tax agent, not a calculator.
Who is this calculator built for?
Four moments where the same headline number needs a second look.
The employee handed a contract offer
A recruiter quotes a day rate that looks like a big pay rise. The like-for-like value strips out the self-funded super and leave hiding inside that number, so the comparison to the current salary is actually fair.
The contractor unsure their rate covers them
Billing steadily but never quite getting ahead. Running the real billable days through the calculator, instead of the 200-day default, usually explains why.
The worker wondering if they are really an employee
Full-time hours, one client, tools supplied, told when and where to work, but paid on an ABN. The legal-status section and the ATO’s own decision tool are the next step, not this calculator.
The labour-only contractor checking their super
Paid mainly for personal labour with no right to delegate. The super-status section explains why an ABN alone does not end the hirer’s superannuation guarantee obligation.
What are the common mistakes in this comparison?
Five errors account for most of the bad conclusions.
Comparing the two headline numbers directly
A $100,000 contract and a $100,000 salary are not the same money. One still has to fund its own super and leave; the other already has both.
Using an optimistic billable-days figure
Assuming 52 billable weeks, or even 48, ignores downtime between contracts that almost every contractor experiences. The gap widens fast as billable days fall, faster than the rate ever moves.
Assuming an ABN settles the employment question
An ABN is a tax registration. It has no bearing on whether the relationship is genuinely a contract or an employment relationship in substance, or on whether superannuation guarantee is owed.
Treating GST as part of the rate
GST collected on an invoice is remitted to the ATO, not kept. It is excluded from every gross figure on this page, and should be excluded from your own budgeting too.
Treating sham contracting as a clever shortcut
Labelling an employment relationship a contract does not remove the obligations, it defers them, with interest and penalties attached when the substance is later examined.
Contractor vs Employee FAQ
Common questions about the like-for-like gap and who counts as a contractor.
Sources
The documents behind every non-computed figure on this page.
- High Court of Australia, Personnel Contracting Pty Ltd v McCourt [2022] HCA 13, decided 3 March 2022.
- High Court of Australia, Jamsek v Macedonian Orthodox Community Church St Demetrius Inc [2022] HCA 12, decided 3 March 2022.
- ATO, TR 2023/4, Income tax and superannuation guarantee: who is an employee?, published 11 December 2024: the primacy of the written contract, considered holistically.
- ATO, Difference between employees and independent contractors (QC64491): the indicia table and the employee/contractor decision tool.
- ATO, Super for independent contractors (QC33854), updated 29 April 2026: the mainly-for-labour superannuation guarantee test and its three limbs.
- ATO, Working as an independent contractor (QC43442), updated 5 June 2026: the entitlements a contractor does not receive, and GST, BAS and PAYG instalment obligations.
- ATO, Personal services income: the more-than-50% test and the personal services business tests.
- Fair Work Act 2009 ss86-87: the 4-week National Employment Standards annual leave entitlement.
- ATO individual income tax rates for 2026-27, the low income tax offset, the 2% Medicare levy and the 12% superannuation guarantee rate, as implemented in this site’s tax engine and used for every computed figure above.
All ATO and court sources accessed 28 July 2026. Last verified 28 July 2026.
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