Can I choose to be a contractor just by getting an ABN?

No. Whether you're an employee or a contractor depends on the terms of your contract, such as who controls how the work is done, whether you can send someone else, who bears the risk, and whether you're building your own business. An ABN or a contract that calls you a contractor doesn't decide it. The ATO sets out its view in ruling TR 2023/4.

Do contractors get super?

Sometimes. If you're paid mainly for your own labour and skills, work personally and are paid for hours rather than results, the business must pay you super guarantee even if you have an ABN. Otherwise, you fund your own super and can usually claim a deduction for personal contributions, within the $32,500 concessional cap for 2026-27.

Do contractors get the $1,000 standard deduction?

Not on business income. From 2026-27 the standard deduction applies to labour income such as salary and wages. A contractor running a business claims their actual business expenses instead.

When does a contractor need to register for GST?

When your business turnover reaches $75,000 a year (rideshare drivers from the first dollar). Then you add 10% GST to your invoices and pay it to the ATO; it isn't income. You can also claim GST credits on most business purchases.

Employee or Contractor: What Changes for Your Tax?

A day rate can look much higher than a salary until you count leave, super and costs. Compare a salary with a day rate on 2026-27 rates below, then read how tax works on each side, and why the label on the contract isn't the final word.

Quick answer

As an employee, your employer withholds tax, pays 12% super on top and gives you paid leave, and from 2026-27 you get the $1,000 standard deduction. As a contractor, you're paid gross, fund your own super (unless you're paid mainly for labour), claim business costs, may need to register for GST at $75,000 and pay PAYG instalments. At about 220 billed days a year, a day rate needs to be roughly salary ÷ 190 to match.

A salary next to a day rate

On 2026-27 rates. Nothing you enter is saved or sent.

Salary offered (before tax, super on top)$Contractor rate per day (excluding GST)$Days you'd bill a year 220260 weekdays, less about 20 days' leave, 10 public holidays and 10 sick days is 220.Business costs a year (insurance, accounting, gear)$

As a contractor, put 12% of profit into super myself (and claim it as a deduction)

Employee

$84,600

take-home pay a year

Salary$110,000

Tax (with the $1,000 standard deduction)$25,400

Super, paid by the employer$13,200

Paid leave and public holidaysYes

Take-home plus super$97,800

Contractor

$99,838

take-home pay a year

Billed ($700 × 220 days)$154,000

Profit after costs$151,000

Tax (no standard deduction)$33,042

Super, paid by you$18,120

Take-home plus super$117,958

Employee$97,800

Contractor$117,958

To match this salary's take-home pay and super at 220 days a year, a contractor needs about $573 a day (excluding GST). If you're registered for GST, add 10% to invoices; that part isn't yours to keep.

Estimate only, on 2026-27 rates. Assumes private hospital cover (no Medicare levy surcharge), no study loan repayments, and a sole trader not limited by the personal services income rules. It doesn't value job security, leave loading or workers compensation. General information, not advice.

It isn't a label you choose

Whether you're an employee or a contractor depends on the terms of the contract, not what it calls you or whether you have an ABN. The ATO looks at whether you work in the business you're engaged by, or run your own business serving it. The main signs:

Control: who decides how, when and where the work is done.
Delegation: whether you can send someone else to do it.
Risk: who pays to fix defects or bears the cost of injury.
Tools and equipment: who supplies them, and at what scale and cost.
Goodwill: whether you're building a business of your own.

Source: ATO — employees and contractors and TR 2023/4. Fair Work uses its own test for workplace rights, so the answer can differ for tax and for employment law.

How tax works on each side

	Employee	Contractor
Tax during the year	Withheld from each pay	Paid gross; PAYG instalments once your business income is established
Super	12% on top, paid with each pay from 1 July 2026	Self-funded and deductible, unless paid mainly for labour
$1,000 standard deduction	Yes, from 2026-27	Not on business income
Deductions	Work-related expenses	Business expenses (limited if the PSI rules apply)
GST	No	Register at $75,000 turnover
Leave	Paid leave and public holidays	Unpaid; days off aren't billed

Sources: ATO — super from your employer, standard deduction, PAYG instalments and registering for GST.

Super when you contract

If you're paid mainly for your own labour, work personally and are paid for hours rather than results, the business must pay you super guarantee even if you quote an ABN. Otherwise, super is up to you. Personal contributions are usually deductible if you lodge a notice of intent with your fund before you claim, and count towards the $32,500 concessional cap for 2026-27. Source: ATO — personal super contributions and contributions caps.

The personal services income rules

If most of what you're paid is for your personal skills or effort, the personal services income (PSI) rules can apply. Unless you count as a personal services business, you're taxed much like an employee: you can't claim some costs, such as rent on your home or payments to a partner for admin work. You're usually a personal services business if you're paid for results and fix your own defects (the results test), or if less than 80% of your income comes from one client and you pass another test, such as having unrelated clients from advertising. Source: ATO — personal services income.

Setting a day rate

Start with the days you'll actually bill. A year has about 260 weekdays; take off four weeks' leave, about ten public holidays and some sick days and you're near 220, before any gaps between contracts. Then cover the super an employer would pay, your insurance and accounting, and the risk of quiet months. The calculator above does the tax maths; the gaps are yours to judge.

Before you switch

Read the contract: would it make you a contractor in substance, not just in name?
Price in super, leave, insurance and gaps, not just tax.
Check whether the business must still pay you super (paid mainly for labour).
Plan for GST at $75,000 and for PAYG instalments after your first year.
Ask a registered tax agent about the PSI rules before you set up a company or trust. When an agent is worth it

Frequently asked questions

See what a salary is really worth

Check take-home pay on 2026-27 rates, then compare it with a day rate above.

Open the take-home pay calculator