Tax for Contractors Australia
Use this page if you earn income as a contractor, consultant, or freelancer and need a practical starting point on ABN income, GST, PSI, super, and common deduction rules.
Quick answer: contractors are not taxed under a special flat rate. If you are operating as a sole trader, your net business profit is generally taxed at individual marginal rates. But contractor labels can be misleading: some arrangements are treated as employment for tax or super purposes, and personal services income rules can limit what you can deduct or how income is attributed.
What to check first
- Employee or contractor: the ATO looks at the real working arrangement, including control, risk, and who provides tools and equipment.
- GST threshold: if your GST turnover is $75,000 or more, you generally need to register for GST and start lodging BASs.
- PSI exposure: if you are mainly being paid for your own labour or skills, personal services income rules may apply.
- Super: some contractors are still entitled to super when they are paid mainly for their labour under a contract.
What contractors can usually deduct
Usually claimable if genuinely work-related
- Business-use phone and internet costs
- Software, subscriptions, and cloud tools used to earn income
- Professional indemnity, public liability, and accounting fees
- Home office running costs where you work from home and keep records
- Motor vehicle costs for eligible work travel, with records to support the method used
Common mistakes
- Claiming private costs just because you invoice through an ABN
- Assuming a laptop or phone is immediately deductible without checking the asset rules
- Ignoring PSI restrictions where income mainly comes from your own labour or skills
- Assuming no super applies just because the contract says you are a contractor
Records you should keep
- Invoices, bank records, and contracts showing the work arrangement
- Receipts and tax invoices for each business expense
- Business-use working papers for mixed expenses such as phone, internet, and home office
- Vehicle records, including logbooks where relevant
- Any BAS, GST registration, or PAYG instalment notices from the ATO
Start with these calculators
Contractor vs employee
Compare ABN income against PAYG take-home pay.
Sole trader tax calculator
Estimate income tax, GST, and PAYG instalments on business profit.
BAS calculator
Estimate GST, PAYG withholding, and instalments for reporting periods.
GST calculator
Add or remove GST quickly when checking invoices and pricing.
Contractor tax FAQs
Do contractors always need an ABN?
Not every work arrangement that is called a contract is treated the same way for tax. The ATO looks at the actual facts of the arrangement. An ABN by itself does not prove you are genuinely carrying on a business.
Do contractors have to register for GST?
You generally need to register if your GST turnover reaches $75,000 or more. Below that amount, registration is usually optional, but once registered you need to charge GST on taxable sales and lodge BASs.
Can a contractor still get super?
Yes, potentially. Some contractors are treated as employees for super guarantee purposes where they are paid mainly for their labour. The contract wording is not the only test.
Tax Accuracy & Sources
This guide is a practical summary for common contractor scenarios. Deductibility still depends on your actual arrangement, substantiation, and whether PSI, GST, or super rules apply.
Uses 2025-26 ATO rates.