Why Most Freelancers Undercharge
New freelancers often set rates by looking at what others charge or by dividing their old salary by 2,000 hours. That approach ignores three costly realities: not every hour is billable, tax and super come out of your revenue (not your client's problem), and running a business has cash expenses that a PAYG employee never sees. The result is a rate that looks competitive but leaves you earning less than minimum wage after tax.
This calculator reverses the problem. Start with what you want to take home, add what the business costs to run, gross up for tax and super with a buffer percentage, and divide by the hours you can realistically bill. The output is the hourly and daily rate you need to quote — with an optional GST-inclusive figure if you are registered for GST in Australia.
The Freelance Rate Formula
When you enter a target take-home (after tax):
- Required gross revenue = Annual expenses + (Target take-home ÷ (1 − Tax buffer %))
- Annual billable hours = Hours per week × Weeks per year
- Hourly rate = Required gross revenue ÷ Annual billable hours
- Daily rate = Hourly rate × Billable hours per day
The tax buffer is a planning shortcut — not a precise tax calculation. A 30% buffer means you assume 30% of your gross profit (after expenses) goes to tax, Medicare, and super combined. If you want $80,000 in your pocket and use a 30% buffer, you need roughly $114,286 in gross profit before expenses: $80,000 ÷ 0.70. Add $5,000 expenses and required revenue is $119,286.
If you switch to gross revenue goal mode, the calculator treats your entered figure as the revenue target and adds expenses on top — useful when you are planning from a top-line business budget rather than a personal take-home target.
Worked Example: Australian Designer
Maya is a freelance UX designer in Melbourne. She wants $85,000 take-home, spends $6,000 per year on tools, insurance, and accounting, plans 28 billable hours per week over 48 weeks (allowing four weeks off), and uses a 30% tax buffer. She is GST-registered.
- Gross profit needed: $85,000 ÷ 0.70 = $121,429
- Required revenue: $121,429 + $6,000 = $127,429
- Billable hours: 28 × 48 = 1,344 hours
- Hourly rate (ex-GST): $127,429 ÷ 1,344 = $94.81
- GST-inclusive quote: $94.81 × 1.1 = $104.29/hr
- Daily rate (7.5 hrs, ex-GST): $711.08/day
Maya might round to $95/hr ex-GST or $105/hr inc-GST on proposals. If she billed 35 hours per week instead of 28 without raising her rate, she would need the same total revenue in fewer weeks — but burning out on non-billable work is why the 28-hour assumption matters.
Billable Hours: The Hidden Variable
A standard full-time job is 38 hours per week, 48–52 weeks per year. Freelancers spend time on proposals, invoicing, client calls, learning new tools, and business development — none of which appear on a timesheet you can charge. Industry rule of thumb: assume 50–70% utilisation of your working hours.
If you work 40 hours per week but only bill 25, your effective hourly capacity is 25 — not 40. Enter honest billable hours in the calculator. If you are just starting and spend half your week on sales, use 15–20 billable hours until your pipeline matures.
GST and Invoicing in Australia
GST registration is required when turnover reaches $75,000 in a 12-month period (or you can register voluntarily). Registered businesses charge 10% GST on taxable supplies, show it on tax invoices, and report it on BAS. The GST you collect is not yours — you remit it to the ATO (minus input credits on purchases).
When quoting, be explicit: "$100/hr + GST" (client pays $110) vs "$110/hr inc GST" (you still remit $10). This calculator's GST toggle multiplies your required ex-GST rate by 1.1 for the inc-GST quote figure. For BAS math, use our GST Calculator.
Beyond the Hourly Rate
Hourly billing is simple but caps your income at hours available. Many freelancers move to project-based or value-based pricing once they understand their floor rate from this calculator. The floor rate answers: "What is the minimum I can charge without losing money?" Value pricing answers: "What is this outcome worth to the client?" — often higher than hours × rate.
Also model payment processing: if clients pay via PayPal or card, factor fees using our PayPal Fee Calculator. For overall business viability, cross-check with the Break-Even Calculator and Profit Margin Calculator. For precise personal tax, use the Australian Income Tax Calculator.