Why use this calculator
New freelancers usually set a rate by taking their old salary, dividing by about two thousand hours, and adding a bit. That method under-prices the work severely, because an employee's hourly cost to a business is far higher than their hourly pay. As a sole trader you fund your own superannuation, your own annual and sick leave, your own equipment, software, insurance and accounting, and you pay tax on profit rather than having it withheld.
You also cannot sell every hour you work: quoting, invoicing, chasing payment, marketing and learning are all unpaid. This calculator starts from the only number you actually care about, which is what lands in your bank account for the year, then adds back tax at current Australian resident rates, adds your expenses, and divides by the hours you can genuinely sell. The result is a floor below which the work is not worth doing.
How to use it
- Start with the take-home pay you need for the year, which is the after-tax figure, not a gross salary you are comparing against.
- Enter the billable hours you can realistically sell in an average week, which for most independent workers is far fewer than the hours they work.
- Enter your total working hours separately so the tool can show your utilisation.
- Set the weeks you work as fifty-two less holidays, public holidays and an allowance for illness, because unpaid time off has to be funded by the weeks you do work.
- Take your business expenses from last year's tax return or add up software, insurance, accounting, equipment, phone and travel.
- Say whether you carry a study loan, since the compulsory repayment comes out before you see the money.
- Finally set the super percentage you intend to contribute for yourself.
What each result means
- Minimum hourly rate to charge
- The floor that funds your target take-home, your tax and your expenses. Charging less means working for less than you decided you needed.
- Charging $10 an hour more adds
- The extra revenue a year from charging ten dollars an hour above the minimum rate at your billable hours, with the after-tax amount in the note. Use it to judge whether a higher quote is worth the risk of losing work.
- Rate with super on top
- The same rate plus the superannuation you must fund yourself. Quote this when a client expects to pay super separately.
- Day rate for eight billable hours
- A daily equivalent of the hourly floor. Only use it when you can genuinely bill eight hours on that day.
- Weekly invoicing target
- What you need to invoice in an average working week. Tracking this weekly catches a shortfall months before the year does.
- Annual revenue needed
- Total invoiced across the year, before expenses and before tax. This is the turnover figure, not your income.
- Gross profit before tax
- Revenue less business expenses. This is the amount the Australian Taxation Office assesses your income tax on.
- Income tax, levy and study loan
- What the year costs you in tax at current resident rates, including the Medicare levy and any compulsory study loan repayment.
- Billable hours a year
- The total sellable hours behind the rate. Halve these and the rate you need roughly doubles.
- Utilisation rate
- The share of your working time a client actually pays for. Most independent workers sit between sixty and seventy-five per cent.
- True hourly rate for every hour worked
- Take-home pay divided by every hour the business consumes, which is the fair comparison against an employee's hourly pay.
- After-tax take-home
- The target you entered. Every other figure on this page exists to deliver exactly this amount.
The formula
Gross profit is solved so that gross profit minus total tax equals your target take-home, where total tax is Australian resident income tax for 2026-27 less the low income tax offset, plus the Medicare levy at 2 per cent, plus any compulsory study loan repayment, all in dollars per year.
Required revenue in dollars = gross profit plus annual business expenses
Billable hours a year = billable hours per week multiplied by weeks worked per year
Minimum hourly rate in dollars = required revenue divided by billable hours a year
Rate with super = minimum rate multiplied by one plus the super rate, currently 12 per cent under the super guarantee
Utilisation = billable hours divided by total hours worked, times 100
How this number is used in practice
The gap between an employee's pay and a contractor's rate is not profiteering, it is arithmetic. An Australian employer funds superannuation at 12 per cent of ordinary time earnings, four weeks of annual leave, ten days of personal leave, public holidays, payroll tax, workers compensation, a desk, a laptop and the software on it.
Add those together and the real cost of an employee is commonly thirty to forty per cent above their salary. A contractor carries every one of those costs personally, out of the rate, and carries the risk of an empty month as well. Quoting a rate that merely matches an hourly salary is quoting a pay cut.
Utilisation is the lever almost nobody adjusts, and it moves the answer more than the rate does. Selling thirty hours out of a forty-five hour week means a third of your working life is unpaid, and every unbillable hour has to be funded by the billable ones.
Improving utilisation from sixty to seventy-five per cent has the same effect on income as a twenty per cent price rise, and clients never see it. Templates for quotes and contracts, a bookkeeper, scheduled invoicing, and refusing unpaid speculative work are the usual routes. The table on this page shows what each level of utilisation demands of your rate.
Treat the calculated figure as a floor rather than a price. It contains no profit margin, no buffer for slow months, no allowance for equipment replacement and no compensation for the risk you are carrying. Experienced independents typically add twenty to thirty per cent above the floor and raise the rate annually, because employees receive pay rises automatically and freelancers only receive the ones they ask for.
Also set tax aside every time you are paid rather than at the end of the year: a separate account holding roughly a third of every invoice, and the pay-as-you-go instalments the tax office will eventually ask for, prevents the classic second-year cash flow shock.
Worked examples
A designer wanting $80,000 take-home, selling 30 of 45 hours a week across 46 weeks, with $8,000 of expenses
A floor of $83.87 an hour, $93.94 including super, and $2,516.11 to invoice in an average week
A consultant wanting $120,000 take-home on only 25 billable hours a week over 44 weeks, with $15,000 of expenses
A floor of $173.42 an hour, well above the round $150 most consultants default to
A recent graduate wanting $65,000 take-home with a study loan, selling 32 hours a week over 46 weeks
A floor of $69.02 an hour, which is $5.92 more than the same target without the compulsory repayment
When people use it
- Setting a first freelance or contracting rate with something other than a guess
- Checking whether your current rate still delivers the income you need
- Converting an hourly rate into a defensible day rate for contract work
- Comparing a contract offer against a permanent salary on equal terms
- Working out how much a drop in billable hours must raise your rate
- Pricing a fixed-scope quote by converting it into an hourly floor first
Tips
- Treat the result as a floor and add twenty to thirty per cent for profit, risk and the months when work does not arrive.
- Raise your rate every year. Employees receive pay rises without asking, freelancers receive only the ones they negotiate.
- Track utilisation weekly, not annually. Improving it from sixty to seventy-five per cent is worth as much as a large price rise and no client notices.
- Move roughly a third of every payment into a separate tax account on the day it arrives, and do the same with your super contribution.
- Quote the super-inclusive figure to businesses that expect to pay it separately, and be explicit about which figure you are quoting.
- Build up three months of living expenses before going independent. The buffer is what lets you refuse underpriced work.
- Raise the rate before raising the hours. Working more weeks to hit an income target is the least sustainable answer available.
What it assumes, and where it stops being accurate
- Assumes you are an Australian resident sole trader taxed at resident individual rates for 2026-27, with the low income tax offset applied.
- Assumes business expenses are fully deductible and are already net of any GST credits you can claim.
- Excludes GST entirely. If you are registered, GST is charged on top of your rate and remitted, so it changes your pricing but not your income.
- Excludes company and trust structures, which are taxed differently and can change the answer materially at higher incomes.
- Assumes you bill every hour you planned to bill and that every invoice is paid. It contains no allowance for bad debts or unpaid scope creep.
- Contains no profit margin or risk premium. It is the minimum sustainable rate, not a recommended price.
- Superannuation is treated as a percentage added on top of the rate, not as a deductible personal contribution, which would change your tax position.
Terms used on this page
- Billable hour
- An hour a client pays for, as distinct from an hour spent working on the business.
- Utilisation
- The share of your working hours that are billable, the single biggest lever on freelance income.
- Gross profit
- Revenue less business expenses, the amount a sole trader's income tax is assessed on.
- Day rate
- A fixed daily fee, typically priced as eight billable hours, common in contract and agency work.
- Super guarantee
- The compulsory employer superannuation rate, currently 12 per cent, which a sole trader must fund personally.
Questions people ask
- Why is my freelance rate so much higher than my old salary rate?
- Because an employee's pay is only part of their cost. Superannuation, annual and personal leave, public holidays, payroll tax, workers compensation, equipment and software are all funded by the employer. As a contractor you pay all of them from your rate, and you carry the risk of unbilled weeks as well.
- How many hours can I realistically bill?
- Most independent workers sell sixty to seventy-five per cent of their working hours. The rest goes to quoting, invoicing, chasing payment, marketing, admin and professional development. Thirty billable hours out of a forty-five hour week is a realistic and sustainable target rather than a pessimistic one.
- Should superannuation be inside or on top of my rate?
- Either, as long as you are clear and you actually set it aside. Agencies and labour hire firms often expect to pay the super guarantee separately, so quote the super-inclusive figure. If you quote an all-inclusive rate, transfer the same percentage to your fund yourself every time you are paid.
- Does this include GST?
- No. If your turnover reaches the registration threshold you must register, then charge GST on top of your rate and remit it. GST is collected on behalf of the tax office and is never your income, so it changes what a client pays but not what you earn.
- Should I charge hourly or fixed price?
- Fixed price usually earns more once you know how long the work takes, because you keep the benefit of working efficiently. Use this hourly floor to price the quote: estimate the hours honestly, add a contingency, multiply by the rate, and make the scope explicit so extra work is charged separately.
- What if a client refuses my rate?
- Then the work is unprofitable at their budget, which is information rather than failure. Reduce the scope to fit their budget instead of reducing the rate, since a discounted rate becomes the anchor for every future quote. Losing some proposals is a sign the rate is set correctly.
Use this with
Freelance Hourly Rate Calculator answers one part of the question. These pick up where it stops: Freelance Rate Calculator, Sole Trader Tax Calculator, Hourly to Salary Converter and Employee Cost Calculator.
Where these figures come from
Figures and rules on this page follow Australian law and ATO guidance.
- ATO: Tax rates for Australian residents. Income tax brackets for 2026-27
- business.gov.au. Australian government guidance on sole trader tax, GST and pricing
- ATO: Study and training loan repayment thresholds and rates. HELP repayment thresholds and the marginal repayment system
Freelance Hourly Rate Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.