Pty Ltd vs PAYG vs umbrella: contractor structures compared

Agency PAYG (labour hire)

You're a PAYG employee of the agency or labour-hire firm placing you. It withholds tax from your pay and pays your super guarantee, so you carry no business costs and face no personal services income (PSI) question: the payment is ordinary employment income, in your own name, from the start. The agency's payroll tax on your wage is its own cost, already built into what it can afford to pay you, rather than something deducted from your pay separately.

Umbrella company

You're a PAYG employee of a payroll company you chose yourself, rather than one the agency picked. It charges a fee for running your payroll and commonly passes its own payroll tax on to you before it works out your wage, though this varies by provider and neither figure has a published industry standard, which is why our day rate calculator takes both as inputs rather than assuming them for you. Otherwise it behaves like agency PAYG: you're an employee, tax is withheld and super is paid on your behalf.

Sole trader (ABN)

You invoice directly under your own Australian Business Number. Your profit (revenue less deductible business costs) is taxed at ordinary individual rates, the same scale your salary would be taxed on. A sole trader does not pay super guarantee to themself, but a client may owe super guarantee when it contracts directly with an individual mainly for that person's labour, even if they have an ABN. Once gross revenue reaches $75,000 a year GST registration is required. The personal services income (PSI) rules can apply to sole traders and restrict the deductions available. See our PSI rules guide to check. To estimate the income tax on ABN profit, use the Sole Trader Tax Calculator.

Your own Pty Ltd

For an existing private-company loan, use the Division 7A Loan Calculator to check the minimum yearly repayment separately from the income comparison.

You invoice through a company you own. The day rate calculator models its available profit paid as salary plus super guarantee, currently 12% on eligible salary. Where the PSI rules apply, the company's net PSI is attributed to the individual who mainly earned it in that income year, even if the company retains the cash. The company may also have PAYG withholding obligations. Running a company involves costs such as ASIC's annual review fee and accounting; insurance costs depend on the contract and cover chosen.

Payroll tax: whose cost is it?

Payroll tax is a state tax on wages, and under agency PAYG and umbrella it's the payroll entity's liability rather than yours directly: 5.45% in New South Wales above the threshold, and it varies by state and territory. An umbrella company that passes its payroll tax on to you does so by taking it out of your rate before it calculates your wage, which is why the day rate calculator lets you toggle that assumption.

A sole trader's drawings from their own business are not wages paid to themself. That does not settle the client's payroll tax position: in New South Wales, payments for work under a relevant contractor agreement can be deemed wages unless an exclusion applies. An ABN or company is not an automatic exemption. Wages paid by a Pty Ltd, other taxable wages and any grouping rules also matter when testing the applicable state threshold ($1,200,000 in New South Wales). The day rate calculator does not determine these obligations.

What the comparison includes

The four columns use different payment, cost and super assumptions. Agency PAYG and umbrella pay wages as employment arrangements. Sole traders invoice personally and companies invoice through the entity. Check the PSI, super guarantee and payroll tax treatment of the actual contract separately; the calculator is a comparison of stated inputs, not a determination of those rules.