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Contractor guide
Australian contract roles are offered on PAYG through an agency, to ABN sole traders or to contractors with their own Pty Ltd. The choice changes who pays tax and super, when GST applies and what your day rate should be. Here is what each one means.
| PAYG contractor | ABN sole trader | Pty Ltd company | |
|---|---|---|---|
| Who you work for | Employee of the recruitment agency for the contract | Yourself, as a sole trader with an ABN | Your own company, which has its own ABN |
| Income tax | Withheld by the agency from each pay | Paid by you, through your tax return and PAYG instalments | Company tax, then personal tax on what the company pays you |
| Super | Paid by the agency, on top or included in the rate | Often paid by the agency when you are paid mainly for your labour, otherwise your own contributions | Paid by your company on the salary it pays you |
| GST | Not applicable | Register and charge 10% GST once your turnover reaches $75,000 a year | Same rule, at company level |
| Insurance | Usually covered by the agency | Professional indemnity and public liability often required | Professional indemnity and public liability often required |
| Paperwork | Timesheets only | Invoices, BAS once registered for GST, bookkeeping | A company to run: ASIC obligations, accounts, company tax return |
Many Australian contract roles are offered on PAYG: the recruitment agency puts you on its payroll for the length of the assignment, withholds tax from each pay and pays your super. You are usually paid for the days you work, without paid leave. It is the simplest option and needs no business of your own.
With an Australian Business Number you contract as a sole trader and invoice the agency or the client. You pay your own income tax, set money aside for it, and register for GST once your turnover reaches $75,000 a year. Agencies and clients often ask ABN contractors for professional indemnity (PI) and public liability (PL) insurance. Check how super is handled: many agencies pay it on top of an ABN day rate.
Experienced contractors sometimes set up a proprietary limited company. The company signs the contract, invoices, charges GST and pays you a salary and super. It brings more admin and costs, and the personal services income (PSI) rules can apply when most of the income comes from your own work for one client.
Australian day rates are quoted either + super, where super is paid on top at the super guarantee rate (12% since 1 July 2025), or inc super, where it is already included. The difference is about 12%: $1,000 a day inc super is about $893 + super. Always confirm which one an offer means.
This guide gives general information, not tax, legal or financial advice. Check your situation with a registered tax agent or the Australian Taxation Office.
Convert a salary into a day rateWhat is the difference between ABN and PAYG contracting?
On PAYG the recruitment agency employs you for the length of the contract: it withholds your tax, pays your super and you only submit timesheets. On an ABN you run your own business as a sole trader: you invoice the agency, pay your own tax and handle GST once you are registered.
Do ABN contractors get super?
It depends. Under the super guarantee rules, a contractor paid wholly or principally for their labour can be treated as an employee for super purposes, which is why many agencies quote ABN rates + super. If you contract through your own Pty Ltd, the agency does not pay you super: your company pays super on the salary it pays you.
When do I need to register for GST?
You must register for GST once your GST turnover reaches $75,000 a year, or is expected to. You then add 10% GST to your invoices and lodge a business activity statement (BAS).
Why contract through a Pty Ltd?
A company separates your business from you personally and can suit contractors with several clients. It costs more to run, and if most of your income comes from one client the personal services income (PSI) rules can apply, which limit the tax benefits.
How do I compare a salary with a day rate?
Add super, then divide by the days you will actually bill once leave, public holidays and gaps between contracts are taken out, and add your insurance and admin costs. Our day rate calculator does the maths for you.
