Quick answer
To work out your hourly rate, add the wage you want, 12% super, a year of business overheads and a profit buffer, then divide by the hours you can realistically bill, not the hours you work. For a solo owner that is usually 55% to 65% of paid time. In our example, $172,320 of annual costs over 1,003 billable hours gives about $172 an hour plus GST, three times a wage-based $56.
Key points
- Build the rate from five lines: your wage, super, overheads, profit buffer and billable hours.
- Billable hours, not hours worked, are the divisor. Leave, public holidays, admin, quoting and travel all sit outside it.
- Moving from 60% to 50% billable lifts the rate you need by about a fifth, so utilisation is the biggest lever.
- Quote the rate excluding GST, then convert it into fixed-price quotes by multiplying by estimated hours.
- A rate built this way also tells you what you can safely draw, and what a hire has to earn to pay for themselves.
To work out your hourly rate, add up what the business must earn in a year, then divide by the hours you can realistically bill. Not the hours you work, the hours someone pays for. In the example below, a solo owner who wants $110,000 takes home a wage-style rate of about $56 an hour. The rate that actually pays for the wage, super, overheads and a buffer is about $172 an hour plus GST.
That gap is the most common pricing mistake in service businesses, and it hides well, because the owner is busy and the invoices go out. The shortfall shows up later as a thin bank balance and a feeling of working too hard for what’s left.
Why is “my wage divided by my hours” the wrong hourly rate?
Because a wage rate assumes someone else carries everything else. An employee’s $56 an hour is paid for every rostered hour, including annual leave, sick days and public holidays. Their employer supplies the premises, tools, insurance, software, marketing and super.
When you run the business, all of that lands on your rate. And a lot of your week produces no invoice at all: quoting, emails, bookkeeping, driving between jobs, chasing payments, fixing your own mistakes.
The ATO’s small business benchmarks show how much of each sales dollar goes on costs before the owner is paid, in industry after industry. Your rate has to recover those costs and still leave you something. Wage divided by hours recovers none of them.
What goes into a charge-out rate? The five-line build
Write these five lines down. Each is a number you can find.
- Your target wage. What you’d need to pay someone else to do your job, before tax. Not what you hope to scrape together, and not zero. Our guide to paying yourself covers the choices.
- Super. The super guarantee is 12%. If you’re a sole trader you aren’t forced to pay yourself super, but a rate that leaves it out quietly funds your business from your retirement.
- Overheads. A full year of everything that isn’t a direct material cost: premises or home office share, vehicle, insurance, software, phone, accounting, registration and professional fees, marketing, tools and equipment replacement. Pull it from last year’s profit and loss.
- A profit buffer. The money for growth, a slow quarter or the next big purchase. Five to ten per cent on top of costs is a reasonable starting point (about 7% in the example below).
- Billable hours. The honest divisor, which is the part most people get wrong.
How many billable hours do you really have?
Start with the hours in a full-time year, then take away what you can’t bill.
| Step | Weeks | Hours (38-hour week) |
|---|---|---|
| Weeks in a year | 52 | 1,976 |
| Less 4 weeks’ leave | −4 | |
| Less 2 weeks’ sick or carer’s time | −2 | |
| Less public holidays (about 10 working days) | −2 | |
| Working weeks | 44 | 1,672 |
| At 60% billable | 1,003 |
The leave allowances mirror what the National Employment Standards give an employee: four weeks of annual leave and ten days of personal leave. Sole traders have no entitlement, but they still take time off, get sick and lose public holidays, and the business still has costs on those days. Public holiday numbers vary by state, so use your own.
The 60% is the part to test. Track a normal month in a timer app or spreadsheet. Many solo operators find 55% to 65%; anyone doing a lot of quoting, travel or admin can sit lower. Be honest here, because every other number in the build depends on it.
A worked example: a solo clinic owner
This is illustrative only. Picture a solo practitioner who runs a small clinic and treats patients by appointment. The numbers apply equally to a tradie, bookkeeper or designer.
| Line | Annual amount |
|---|---|
| Target wage | $110,000 |
| Super at 12% | $13,200 |
| Overheads (rent, insurance, software, registration, marketing, supplies) | $38,000 |
| Profit buffer | $11,120 |
| Total to recover | $172,320 |
| Billable hours | 1,003 |
| Hourly rate | about $172 plus GST |
The wage-based figure is $110,000 divided by 1,976 paid hours, or about $56. The charge-out rate is three times that. Neither is wrong. They answer different questions: the first is “what does my time cost as an employee?”, the second is “what must each billable hour earn for this business to work?”
At $172 plus 10% GST, the invoice rate is about $189. Test GST separately: once your turnover reaches $75,000 a year you must register for GST, and the GST you collect is the ATO’s money, so never count it when you check whether the rate covers your costs.
How much does the billable percentage change the rate?
More than most owners expect. Same costs, different utilisation:
| Billable share of working hours | Billable hours | Rate needed (ex GST) |
|---|---|---|
| 50% | 836 | about $206 |
| 60% | 1,003 | about $172 |
| 70% | 1,170 | about $147 |
| 80% | 1,338 | about $129 |
Going from 60% to 50% lifts the rate you need by roughly a fifth. That’s why the quickest way to improve margin isn’t always a price rise. Cutting quoting time, batching travel, using templates and invoicing the same day can all push utilisation up. When you do raise prices, our price-rise calculator shows how many customers you could lose and still earn the same gross profit.
What does an employee cost per billable hour?
This is where the rate becomes a hiring tool. Say you take on a $45-an-hour employee for 38 hours a week:
- Paid for the full year: $45 × 1,976 hours = $88,920
- Plus 12% super: $99,590
- They have the same 44 working weeks as you, so 1,672 productive hours and, at 60% billable, 1,003 billable hours
- Wage cost per billable hour: about $99, before tools, supervision, insurance or overheads
If you charge them out at $172, the margin on their time is real but modest once overheads are loaded. Charge them out at $110 and it vanishes. Our guide to hiring your first employee goes through the full cost.
For context, the Fair Work Ombudsman’s minimum wages page puts the National Minimum Wage at $26.44 an hour from 1 July 2026, with a 25% casual loading for casuals on that rate. Awards set higher rates for most roles, so check the pay guide for the classification you actually employ.
Super also moved on 1 July 2026. Under Payday Super, employers now have to get super to the fund within 7 business days of each payday instead of quarterly. That changes your cash flow, not your rate: the cost is the same, but it leaves your account sooner and more often.
How do you turn an hourly rate into a fixed-price quote?
Estimate the billable hours the job needs, add a buffer for what normally goes wrong, and multiply:
- Six billable hours × $172 = $1,032 plus GST
- Add materials at cost plus your markup on them
- Don’t add travel or admin time again if your utilisation figure already counts it
The rate is the floor, not the price. Our guides to pricing your services and quoting a job cover choosing between hourly, fixed and value pricing, and defining scope so a fixed quote doesn’t turn into free work.
What if the rate you need is higher than the market pays?
That’s useful information, and it’s better to find it out now. You have three options:
- Cut costs or lift utilisation until the rate comes down to something the market accepts.
- Move up-market, with a specialty, a package or a faster turnaround that earns a premium.
- Accept a thinner year deliberately, with the buffer funded rather than guessed. Your break-even point tells you how far you can fall before the business loses money.
Whichever you choose, the rate also shows you your cash needs: you pay wages, rent and tools before debtors pay you. Put the rate into the 13-week cash-flow forecaster and you’ll see the lowest week before it arrives. If you’re planning a hire, new equipment or a bigger premises on the strength of the new rate, it’s worth seeing what funding is available while you’re planning, not after the gap opens.
Ready to put the numbers to work?
A proper charge-out rate is a business plan in one line. It shows what you can afford to hire, buy or borrow, and what your work needs to earn to pay for it.
If those numbers say the next step needs funding, whether that’s a second practitioner, equipment, a fit-out or the working capital to bridge slow-paying customers, we’d like to help you find out where you stand. Enquiring takes about a minute, and nothing is checked against your credit file when you ask, so your score stays untouched. We don’t send your details to a pile of lenders either, so your phone won’t light up. One person on our team reads your answers and calls you about your situation.
Please fill the form in accurately, because the more exact the numbers, the better the first match.
Frequently asked questions
How do I calculate my hourly rate as a sole trader?
Add your target wage, super you want to put away, all business overheads and a profit buffer to get your annual cost to recover. Divide by your realistic billable hours for the year, which is typically 55% to 65% of the hours you're paid for once leave, admin and travel are taken out. Then add GST on top if you're registered.
What percentage of my time should be billable?
Most solo service businesses land between 55% and 70%. Under 50% usually means too much unpaid quoting, travel or admin. Over 75% for a long period often means no time for marketing or maintenance, and work starts to slip. Track a month of real time before you trust any number.
Should I include super in my hourly rate if I'm a sole trader?
Sole traders aren't required to pay themselves super, but most build one in at 12% so that the rate funds their own retirement the way an employer's would fund an employee's. If you run through a company and pay yourself a wage, the super guarantee applies and, from 1 July 2026, must reach the fund within 7 business days of payday under Payday Super.
Is my hourly rate before or after GST?
Work it out before GST and add 10% on top when you invoice. You must register for GST once your annual turnover reaches $75,000, and GST you collect belongs to the ATO, so it should never be counted as income when you test whether the rate covers your costs.
How do I turn an hourly rate into a fixed-price quote?
Estimate the billable hours for the job honestly, add a buffer for things that usually go wrong, multiply by your rate, then add materials at cost plus your margin on them. The non-billable time is already inside the rate, so don't add it a second time.
How often should I review my hourly rate?
At least once a year, and whenever a major cost moves: rent, insurance, wages or award rates (which change each 1 July). A rate that is two years old has usually lost more ground to costs than the owner has noticed.