Add up every cost of running your business for a year (wages, super, insurance, vehicle, tools, phone, leave), divide by your billable hours, then add a profit margin such as 20%. That number is your minimum viable hourly rate. Matching a cheaper competitor's price without doing this maths is how most tradies undersell themselves.
Key takeaways
- Your hourly rate must cover wages, superannuation (12% from 01/07/2025), annual leave loading, insurance, vehicle, tools, phone, and a profit margin before you break even.
- Matching a competitor's price without knowing your own costs is the single most common way tradies undersell themselves.
- The cost-plus formula: (total annual costs divided by billable hours) plus your target margin equals your minimum viable rate.
- Most sole-trader tradies in Australia bill between 4 and 6 hours per 8-hour day once travel, quotes, admin, and non-billable time are accounted for.
- If you are registered for GST (required once turnover exceeds $75,000), your quoted rate must either include or clearly exclude GST: never leave it ambiguous.
Work backwards from what it costs to run your business for a year. Add wages, superannuation, insurance, vehicle, tools, and annual leave. Divide by billable hours, then add a profit margin. Anything below that number means you are paying customers to hire you.
Updated 11/09/2026
Why do so many tradies undersell themselves?
Underselling almost always comes from the same mistake: setting a rate based on what competitors charge rather than what it actually costs to deliver the work. You see another plumber or sparky advertising $85 an hour and you think, "I will charge $80 to stay competitive." The problem is you have no idea what that other business's cost structure looks like. They might have a larger van fleet writing down against a bigger revenue base, or they might be quietly going broke.
The only rate that makes sense for your business is one built from your own numbers. That is what the cost-plus formula does. See also our guide on tradie quoting tips for the broader quoting picture, and why quotes are not getting accepted if your pricing is already causing dropoff.
What is the cost-plus formula for a tradie hourly rate?
The formula has three parts. Total all your annual costs. Divide by your real billable hours. Add your target margin. That gives you your minimum viable rate.
Work through these categories and write down a dollar figure for each. Be honest, every number you leave out comes out of your margin.
| Cost category | Notes |
|---|---|
| Your wage (before tax) | What you would pay yourself for the same work as an employee. Not what you draw, what the role is worth. |
| Superannuation | The super guarantee rate is 12% from 1 July 2025 (ATO). On an $80,000 wage that is $9,600 per year. |
| Annual leave and public holidays | 4 weeks leave plus 17.5% loading, plus approximately 10 state public holidays. Fixed costs keep running when you are not billing. |
| Insurance (PL and workers comp) | Public liability typically $700 to $2,500 per year for a sole trader. Workers comp is mandatory once you employ anyone, and some states require it for owner-operators on certain sites. |
| Vehicle | Rego, insurance, fuel, tyres, servicing. Use your last 12 months of receipts or the ATO cents-per-kilometre rate. |
| Tools and equipment replacement | Budget annually, not just when something breaks. A $600 grinder lasting 3 years is $200 per year in your rate. |
| Phone, software, accounting | Work phone plan, quoting app, job management subscription, tax agent, BAS lodgement. |
| Licences, marketing, misc | Annual licence renewals, certifications, Google Business Profile, uniforms, business cards. |
Next, work out your real billable hours. Start with 52 weeks. Subtract 4 weeks annual leave, roughly 2 weeks sick leave, and 2 weeks of public holidays and business admin. That leaves about 44 working weeks. At 5 days per week that is 220 working days.
Now the key: most sole-trader tradies in Australia bill between 4 and 6 hours per 8-hour day once travel, quoting, materials runs, administration, and non-billable wait time are accounted for. Use 5 hours as a conservative middle estimate. That gives you 220 days times 5 hours equals 1,100 billable hours per year.
Then apply the formula: divide your total annual costs by your billable hours to get your break-even rate, then add your target margin.
What does a worked example look like?
Here is an illustrative sole-trader plumber in Victoria. Every dollar figure below is an assumption for illustration only, not a benchmark or a quote.
| Item | Annual cost (AUD) |
|---|---|
| Owner wage (equivalent) | $80,000 |
| Super at 12% | $9,600 |
| Annual leave and loading buffer | $7,500 |
| Public liability insurance | $1,800 |
| Vehicle (rego, fuel, service) | $9,000 |
| Tools and equipment replacement | $3,000 |
| Phone and software | $2,400 |
| Accounting and licences | $2,200 |
| Marketing and misc | $2,500 |
| Total annual costs | $118,000 |
Break-even rate: $118,000 divided by 1,100 hours equals $107.27 per hour. Add a 20% profit margin: $107.27 times 1.20 equals $128.72 per hour, rounded to $130.
That is your minimum viable rate. If you are quoting below it on labour, every job costs you money.
What overhead items do most tradies forget to include?
The wage line is obvious. These are the items that routinely get left out.
- Superannuation. The super guarantee rate is 12% from 1 July 2025, and Payday Super takes effect from 1 July 2026, requiring employers to pay super at the same time as wages. That tightens cash-flow timing even if the rate stays the same. Build it into every employee hour in your model.
- Annual leave loading. Modern award minimum rates set the legal floor for employee wages across trade occupations and are updated by the Fair Work Commission annually. As the Fair Work Ombudsman states: "Pay rates and conditions in your industry are set by modern awards. Awards are legal documents that outline the minimum pay rates and conditions of employment." Leave loading is not optional.
- Non-billable travel time. Forty-five minutes each way is 90 minutes a day you are not billing. Either add a travel line to quotes or build it into your effective rate.
- Quoting and administration time. Two hours a week quoting plus one hour on admin is roughly 130 non-billable hours per year. See how to quote jobs faster to cut this, and tradie quoting tips for quotes that win more often.
- Sick leave buffer. Two weeks off at a $130 per hour effective rate is roughly $10,400 of revenue you will not earn. Fixed costs (insurance, vehicle, software) keep running regardless.
Are tradie hourly rates in Australia typically $70 to $120?
The tradie charge-out rates of $70 to $120 per hour figure gets cited often, and it is a rough ballpark for the AU trades market. But the range is wide enough to be nearly useless for setting your own rate. The number depends heavily on trade (a registered electrician commands more than a general labourer), state (metro Sydney and Melbourne rates are higher than regional Queensland), business size (a multi-van operation recovers overhead differently to a sole trader), and whether the rate includes or excludes materials and call-out fees.
What the range does tell you: if the cost-plus formula spits out a number below $70, your model almost certainly has gaps. If your number is above $120 and you are struggling to win work, the issue may be local market positioning rather than your cost structure. Check why your quotes are not getting accepted before cutting your rate.
Does GST change the rate I quote to customers?
Yes, if you are registered. GST registration is required once annual turnover reaches or exceeds $75,000 (ATO). Once you cross that threshold, every invoice must include GST on taxable supplies, which means your effective charge-out rate is your cost-plus rate plus 10% GST.
The practical rule: always state on your quote whether the rate is inclusive or exclusive of GST. "$130 per hour plus GST" and "$143 per hour GST included" are not the same thing to a residential customer who is not GST-registered. Ambiguity causes disputes. If you need to take a deposit before starting work, see should I take a deposit before I start a job for how to structure that cleanly.
Once you are GST-registered, the 10% you collect belongs to the ATO, not to you. It does not affect your margin, but it does affect your cash flow if you treat GST receipts as income. Keep them separate and set them aside for the quarterly BAS.
What is the fastest way to check if my current rate is too low?
Pull up your accounting software and open last year's Profit and Loss report. Total every cost including what you paid yourself. Then open your job management app and count the hours you actually billed (not hours worked, hours charged). Divide costs by billed hours. That is your real break-even rate for last year.
If your quoted rate was below that number, you lost money on labour. If the gap is uncomfortable, raise your rate gradually: new clients first, then existing ones as opportunities arise. A 10% increase on a $100 per hour rate adds $10,000 to annual revenue on 1,000 billed hours, without a single new customer.
If you want to work through the numbers with someone who can see the whole picture, book a free 15-minute discovery call and we will walk through your cost model together. For quoting structures that make it easier to price consistently, see how to quote jobs faster and the TradieBuddy AI solutions overview.
Common questions
What is a fair hourly rate for a tradie in Australia?
There is no single fair rate. It depends on your trade, state, experience, and costs. A common benchmark is $70 to $120 per hour for Australian trades, but the only rate that is fair to you is one built from your own costs using the cost-plus formula. Anything below your break-even rate means you are subsidising your customers.
Do I need to include GST in my hourly rate?
If your annual turnover reaches or exceeds $75,000, you must register for GST and add 10% to taxable supplies. Always state on every quote whether your rate is inclusive or exclusive of GST. Ambiguity causes payment disputes.
How do I account for superannuation when setting my rate?
If you employ anyone, the super guarantee rate is 12% from 1 July 2025. Add 12% of the employee's wages to your annual cost before you calculate the hourly rate. From 1 July 2026, Payday Super requires super to be paid at the same time as wages, so factor this into your cash flow planning as well.
How many hours a day can I realistically bill as a sole-trader tradie?
Most sole traders bill 4 to 6 hours per 8-hour day when travel, quoting, materials runs, and administration are accounted for. Use 5 hours as a conservative planning figure. If your number is lower, that affects your break-even rate and you should reflect it in your model.
Can I charge more for emergency or after-hours work?
Yes. Emergency call-outs and after-hours work carry higher costs (your personal time, possible overtime loadings for employees, vehicle use outside normal hours) and most customers expect a premium. State your emergency rate clearly on your website and in your quote terms so there is no dispute when the bill arrives.
Written by
Mitchell Cross
Founder, TradieBuddy AI
Mitchell Cross is the founder of TradieBuddy AI. He identifies the pain points and bottlenecks holding Australian trade businesses back and fixes them, improving profitability, efficiency and scalability. He builds the automations and systems that cut admin, capture missed leads, and connect a business's tools into one place, and writes these guides to share what actually moves the needle for tradies.
More from Mitchell Cross →