Employees see clean payslips; sole traders see **profit**. If you ignore **11.5% super**, you will under-quote by double digits.
Tax comparison: numbers to anchor on
| Band | Employee net (model) | Sole trader net (same headline revenue) | | --- | --- | --- | | $90k | ~$64k | ~$57k if you force 11.5% super + typical expenses | | $120k | ~$85k | Needs >$135k revenue to catch up | | $150k | ~$102k | MLS/Div293 matter in real life—VERIFY |
Benefits you lose
- Employer super: 11.5% × ordinary time earnings (2025 law) - Paid leave: ~4 weeks salary equivalent ($7k+ on $90k base) - Income protection / group health: budget $1.5k–$3k/yr to replace basics
Break-even
Expect +18–28% gross-up versus PAYG net once super + insurance + bench time are honest.
Hidden costs
BAS agent, software, unpaid RFPs, and quarterly PAYG instalments on cash flow.
When contracting wins
Premium rates (≥30% over salary), multiple T&M clients, deductible gear-heavy work (film, field eng).
When it does not
Single client behaving like payroll without SG, visa restrictions, or <60% utilization.
Real numbers: super and payroll tax
Median weekly earnings ~A$1,400-1,500 full-time; contractors must replace 11.5% SG from revenue, not magic.
| Benchmark | Order of magnitude | Why it matters |
|---|---|---|
| SG on A$90k | ~A$10,350 employer-paid | Freelancer: voluntary super from profit. |
| Medicare Levy | 2% typical | Stacks on taxable income. |
| GST compliance | BAS cadence | Cash timing ≠ profit. |
| Paid leave | ~4-5 weeks + sick | Lost revenue unless priced in. |
| Income protection | A$1k-3k/yr retail | Group cover cheaper. |
Benefits gap — replacement costs
- Super: match SG% or accept retirement gap. - Private health: A$2k-4k/yr extras beyond Medicare. - Income protection / TPD: retail premiums. - Training & certs: A$2k-5k/yr for parity. - Annual leave loading: employees get 17.5% on leave in many awards—contractors invoice it or lose it.
The break-even point
Expect +25-45% more ABN revenue than PAYG package for similar cash + super wealth once quarterly PAYG, GST admin, and leave are counted.
Structures beyond sole trader
- Sole trader: simplest. - Pty Ltd + wages: Division 7A and PSI rules—accountant required. - Partnership: shared clients. - GST: A$75k registration threshold.
Five-year sketch
3% PAYG raises vs 4% day-rate lifts at 85% utilisation: contracting wins with diversified clients. Division 293 and HELP repayments can bite high earners—model totals.
Three Australian profiles who did the maths
Senior cloud engineer, Sydney
Current situation (employee):
$140,000 + $16,100 super (SG 11.5%) = $156,100 total comp, PAYG net ~$97,000. Hidden employer cost: SG + payroll tax (NSW) ~$22,500.
Question they’re asking:
I’m being offered $900/day as a sole trader — how does that actually compare?
Contractor scenario:
$900/day × 210 days = $189,000 revenue. Voluntary super $18,900 (10%), income tax + Medicare ~$62,000, income protection $2,400, accountant + BAS $2,500, operating $5,000 → net ~$98,200. Stress test 180 days: revenue $162,000 → net ~$77,000.
Honest verdict:
At 210 days, negligible gain (+$1,200 net vs employee incl. super). Skipping voluntary super raises cash but wealth risk. At 180 days you’re materially worse. Push for $1,000/day before leaving a stable role.
Project manager, Melbourne
Current situation (employee):
$105,000 + $12,075 super, PAYG net ~$74,000.
Question they’re asking:
What day rate do I need to not take a cut?
Contractor scenario:
Break-even target net $74,000 → need ~$145,000 gross revenue (tax + Medicare + super + bench — +18–28% style gross-up on this page). At 200 days = $725/day. At 185 days = $784/day. At $750/day × 195 days = $146,250 → net ~$75,600.
Honest verdict:
$750/day at 195 days = break-even plus buffer. Melbourne senior PM market often $650–850/day. Budget PAYG instalments — year-one cash flow bites.
Data analyst, Brisbane (sham contracting risk)
Current situation (employee):
$85,000 + $9,775 super, PAYG net ~$61,000.
Question they’re asking:
My employer wants to convert me to contractor at the same hourly rate my salary implies — is that legal and worth it?
Contractor scenario:
$85,000 ÷ 1,820 hours = $46.70/hr salary equivalent. Minimum viable: ($85,000 × 1.25) ÷ (200 days × 7.5 hrs) = $70.83/hr. At $71/hr × 200 × 7.5 = $106,500 → net ~$66,000 after tax, voluntary super, protection (illustrative).
Honest verdict:
Even at a “correct” minimum, net can sit below PAYE once you fund your own super. Employer is offloading SG. Counter $80/hr minimum or stay PAYG. Check ATO employee vs contractor indicators if hours/direction are fixed.
FAQ
Voluntary; many pay instalments instead—plan cash or you will get a March surprise.
Personal services income can limit deductions—verify with agent.
**A$20k-40k** before leaving strong SG roles.
Often GST-free—still need BAS discipline.
Work rights differ—bespoke advice.
Deduction rules tightened—document hours and floor area.
Generally not deductible for individuals—confirm.
Usually unnecessary—keep one clean P&L.
Coming soon: personalized transition kit
We are preparing country-specific checklists, break-even PDF exports, and vetted partner introductions (accountants, fiduciaries, umbrella companies). For now, save your results with the download or email tools on calculator pages where available.