Most Australian freelancers undercharge — not because they undervalue themselves, but because they're calculating their rate the wrong way.
They look at their old salary, divide by 52 weeks and 40 hours, and think that's their baseline. It isn't. That number ignores superannuation, income tax, unpaid weeks, insurance, accounting fees, and a dozen other costs that your employer was quietly absorbing on your behalf.
The result? Freelancers who feel busy but can't figure out why they're not getting ahead financially. This guide walks through exactly how to calculate a rate that actually replaces your income.
The instinct when going freelance is to find an equivalent employee salary and work backwards to an hourly rate. The problem is that employees and freelancers have fundamentally different cost structures.
When you're employed, your employer pays super on top of your salary (12% from July 2025), covers your equipment, absorbs the cost of your sick days and annual leave, and pays for your professional memberships, software, and insurance. None of that shows up on your payslip — it's invisible. The moment you go freelance, every one of those costs becomes visible and yours to cover.
There's also the time problem. An employee works 52 weeks a year and gets paid for all of them. A freelancer works — and only earns — during billable weeks. Factor in four weeks of holidays, a week of sick leave, public holidays, and two to three weeks between contracts, and you're typically billing for 44 to 46 weeks. Not 52.
Start with what you actually need in your bank account each month — not your gross salary. This is the foundation. Everything else gets added on top to arrive at your required gross revenue.
As a sole trader you pay the same progressive income tax rates as employees, but with one critical difference: no one withholds tax from your invoices. You're responsible for setting aside roughly 28–35% of your income (depending on your bracket) and paying it via PAYG instalments or at tax time. Many new freelancers spend this money and face a painful ATO bill.
The superannuation guarantee (12% from 1 July 2025) means your employer was contributing $10,800 on top of a $90,000 salary. As a freelancer, that disappears unless you fund it yourself. Not contributing doesn't mean you've earned more — it means you've quietly borrowed from your future self.
These are deductible, which helps at tax time, but they still need to come from your revenue. Typical annual expenses for an Australian freelancer:
| Expense | Typical annual cost |
|---|---|
| Tax agent / accountant | $1,500 – $3,000 |
| Professional indemnity insurance | $800 – $2,500 |
| Public liability insurance | $500 – $1,200 |
| Software subscriptions | $600 – $2,000 |
| Equipment depreciation | $300 – $1,500 |
| Professional development | $500 – $2,000 |
| Total (typical range) | $4,200 – $12,200 |
Admin, business development, writing proposals, chasing invoices — this time is real work but it's not billable. Most experienced freelancers estimate 15–25% of their working time is non-billable. Your hourly rate needs to carry the weight of those hours too.
Once you know what your take-home needs to be, the calculation works like this:
The tricky part is that steps 2 and 3 are interdependent — your tax depends on your gross income, which depends on your super, which depends on your gross income. That's why the maths is iterative rather than a simple division. Our calculator solves this loop automatically.
Let's say you're earning $90,000 (super inclusive) and considering going freelance as a consultant. You plan to bill 46 weeks a year, 6.5 hours a day. Your annual expenses are around $6,200.
| Item | Employee | Freelancer equivalent |
|---|---|---|
| Gross income | $90,000 | $128,400 needed |
| Super | Employer pays $9,643 | Self-funded: $15,408 |
| Business expenses | Employer covers | $6,200 from revenue |
| Income tax + Medicare | Withheld by employer | $26,800 (approx) |
| Take-home pay | ~$63,500 | ~$63,500 (matched) |
| Hourly rate needed | N/A | ~$86/hr · ~$559/day |
If your annual turnover exceeds $75,000, you must register for GST with the ATO. This means adding 10% on top of your rate on invoices — but that 10% is collected on behalf of the ATO, not your income. If you're above the threshold, your client pays $94.60 for every $86 of your work, and you remit the $8.60 to the ATO via a quarterly Business Activity Statement (BAS).
Practically speaking: at any rate that replaces a meaningful salary, you'll almost certainly be above the $75,000 threshold. Budget 3–4 hours per quarter for BAS lodgement, or have your accountant handle it (this is exactly why the accountant cost is in the expense table above).
Your calculated minimum rate is your floor — the point below which you're subsidising your clients. Market rates vary significantly by industry, experience, and location. These are general 2025–26 ranges:
| Profession | Hourly rate range | Day rate range |
|---|---|---|
| Software developer (mid–senior) | $100 – $180/hr | $650 – $1,200/day |
| UX / product designer | $90 – $160/hr | $580 – $1,050/day |
| Marketing consultant | $80 – $150/hr | $520 – $980/day |
| Copywriter / content strategist | $75 – $130/hr | $490 – $850/day |
| Project manager | $90 – $160/hr | $580 – $1,050/day |
| Accountant / finance consultant | $100 – $200/hr | $650 – $1,300/day |
| HR / recruitment consultant | $80 – $140/hr | $520 – $920/day |
| IT / systems architect | $120 – $220/hr | $780 – $1,440/day |
If your calculated minimum rate sits comfortably within these ranges, you have pricing power — room to charge at or above market. If your minimum rate is already at the top of the range, you may need to trim expenses, accept lower super contributions initially, or position your services more specifically to justify premium pricing.
This is the single most expensive mistake. Plugging 52 weeks into your rate calculation and then actually billing 45 means your effective rate is 13% lower than you thought. Across a year on a $100/hr rate, that's roughly $18,000 in missing revenue. Be conservative: use 44–46 weeks unless you have an unusually consistent client pipeline.
Your expenses increase each year. Your skills improve. Market rates shift. A rate you set in 2024 that was fair might be underpaying you by 2026 if you haven't revisited it. Review your rate at least once a year — ideally at the start of each new financial year in July, which conveniently aligns with updated ATO tax rates.
Competitor rates you see advertised may be inclusive of GST, exclusive of GST, through a company structure with different tax treatment, or simply underpriced. Matching someone else's number without knowing their cost structure can lock you into an unprofitable rate.
If you've realised you're currently undercharging, don't panic — most established clients accept rate increases if handled professionally. The key principles:
Enter your current salary, working pattern, and expenses — the calculator handles the tax maths automatically.
Calculate my rateQuote your base rate and specify "+GST" separately. So: "$110/hr + GST" means you invoice $121/hr, collect the $11, and remit it to the ATO. Never absorb GST into your base rate — that effectively gives clients a 9.1% discount at your expense.
As a sole trader your income is taxed at individual progressive rates (up to 45% for income above $180,000). A company pays a flat 25% tax rate (for businesses under $50M turnover). The company structure can be more tax-efficient at higher income levels but comes with more administrative overhead and setup costs. Speak to a registered tax agent before making this decision — it depends heavily on your specific situation.
You're not legally required to pay yourself super as a sole trader — but if you don't, you're building no retirement savings. The practical recommendation is to treat 12% of gross income as a super contribution, paid into a personal super fund, and factor this into your rate calculation from day one.
Once your tax liability exceeds $1,000 the ATO will enrol you in PAYG instalments — quarterly prepayments based on your prior year's income. In your first year you'll typically pay a lump sum at tax time. The safest approach is to set aside 30–35% of every invoice payment into a separate account and treat it as untouchable until tax time.