Contractor vs Permanent Employee in Australia: The Real 2026-27 Trade-Off

It depends entirely on whether you self-fund an equivalent to the 12% Super Guarantee. A sole-trader contractor charging enough to hit a A$120,000-equivalent target (roughly A$710/day at 220 billable days with a 30% loading) nets A$114,212 in cash a year, well ahead of a permanent A$120,000 salary's A$91,080 take-home. But that comparison ignores retirement savings: a permanent employee also gets A$14,400 in employer super on top, for a total value of A$105,480. If the contractor voluntarily sets aside the equivalent 12% themselves, their net drops to A$99,812, still ahead of the permanent role's cash-in-hand but roughly A$5,668 behind its total value including super. The standard 25-30% sole-trader loading is built to cover unpaid leave and risk; it does not fully cover the tax hit of lump-summing your entire year's income at individual marginal rates once you also account for retirement savings properly.

Only if you're paid through a recruitment agency on PAYG payroll. The agency is your employer of record for tax and super purposes, so it must pay the 12% Super Guarantee on top of your wage exactly like a permanent job, which is why PAYG agency contracting typically only needs a 15-20% rate loading. A sole trader or independent contractor invoicing directly has no employer, so no one is legally required to pay super on their behalf. Some sole traders choose to make voluntary personal contributions to replicate it; many don't, which inflates their apparent take-home but leaves a real retirement-savings gap against a permanent employee.

The compulsory repayment thresholds and marginal rates are identical either way for 2026-27: nothing below A$69,528 of repayment income, 15c per dollar from there to A$129,717, then A$9,028 plus 17c per dollar to A$186,050, then a flat 10% above that. The practical difference is collection. A permanent employee has HECS/HELP withheld automatically through PAYG, spread across every payslip. A sole trader has no PAYG withholding, so the entire compulsory repayment falls due as a lump sum when you lodge your tax return, calculated on your net business income for the year. Budget for it throughout the year rather than being surprised by it at tax time. See the HECS/HELP repayment thresholds guide for the full band breakdown.

You lose all of it, and that's the real reason the standard sole-trader loading sits at 25-30% rather than a smaller unpaid-leave-only figure. A permanent employee accrues 4 weeks of paid annual leave, personal/carer's leave, and is entitled to statutory redundancy pay (up to 4 weeks per year of service under the National Employment Standards, on top of notice) if their role is made redundant. A contractor, whether sole trader or agency PAYG, has none of that. Unpaid time off between contracts, sick days, and any gap in the pipeline comes straight out of your own pocket with zero statutory protection. The 220-billable-day default already builds in an allowance for this, but it's a self-funded allowance, not an entitlement.

It applies the same way to anyone above the income thresholds without private hospital cover, contractor or not, an extra 1-1.5% on top of the standard 2% Medicare Levy. Because a sole trader's full contract revenue (after loading) is taxed as personal income in one lump, contractors are more likely to cross into MLS territory than a permanent employee earning a lower base salary for comparable seniority. At the senior level modelled in this guide (a A$207,900 sole-trader contract revenue), that's well above every MLS threshold, so budgeting for either the surcharge or private hospital cover is worth doing before you set your rate. See the Medicare Levy Surcharge Calculator for your exact tier.

220 days is the standard default: a 260-day working year (52 weeks x 5 days) minus 20 days annual leave, 10 public holidays, and 10 sick/carer's days that a contractor doesn't get paid for. It's a reasonable middle estimate, not a guarantee, real utilisation varies with how easily you can line up back-to-back contracts. The Australia Contractor Day Rate Calculator lets you adjust billable days, loading percentage, and structure (PAYG agency vs sole trader) to your own situation rather than relying on the two worked examples in this guide.

Yes, and it catches contractors just as often as it catches permanent hires. A day rate quoted as including super (common in PAYG agency contracts) means the 12% Super Guarantee is deducted from that headline number before it becomes your wage; a day rate quoted excluding super means the full amount is your wage and super is calculated and paid separately on top. Always confirm which one you're being offered before comparing a day rate to a base salary. See the guide on whether super sits on top of your salary in Australia for the permanent-employee version of the same trap.