Add up what the business must recover in a year, including owner pay, overheads and a profit target, then divide by the hours you can realistically bill. Business.gov.au describes this per-hour method as calculating all business costs at an hourly rate, including wages, super, leave entitlements and taxes. The figures below are fictional assumptions, not market averages.[1]
The formula
Charge-out rate = (owner pay + labour costs + overheads + profit target) divided by billable hours. Work in ex GST amounts.
Business.gov.au says businesses that earn money by doing work for customers often charge per hour, and that the hourly rate should cover wages, superannuation, leave entitlements and taxes. Add an owner pay line if you work in the business, so your own time is not unpaid.
Sources[1]
Fictional worked example
These are invented assumptions for one owner-operator. Replace each with your own figures. They are not benchmarks for any trade or region. Include your own super and other applicable costs in the budget lines and avoid counting the same cost twice.
| Item | Assumption (annual, ex GST) |
|---|---|
| Owner pay target | $90,000 |
| Overheads (vehicle, insurance, tools, software, accountant, licences) | $38,000 |
| Profit and reinvestment target | $15,000 |
| Total to recover | $143,000 |
| Hours available after leave and public holidays | 1,600 |
| Share of those hours you can bill | 70% |
| Billable hours | 1,120 |
| Charge-out rate | $143,000 divided by 1,120 = $127.68 an hour ex GST |
Sources[1]
Why billable hours move the rate
Travel, quoting, supplier runs, admin and callbacks can consume hours you do not separately bill. Track your own time before setting a billable share. Using the same fictional $143,000 and 1,600 available hours:
| Billable share | Billable hours | Rate ex GST |
|---|---|---|
| 60% | 960 | $148.96 |
| 70% | 1,120 | $127.68 |
| 80% | 1,280 | $111.72 |
Sources[1]
Employees, GST and checking the result
For an employee, include wages, super, leave entitlements and applicable employment costs in your budget, then use that employee's expected billable hours. These examples assume a GST-registered business making fully taxable supplies. At 10% GST, $127.68 ex GST becomes $140.45 including $12.77 GST. If you are not registered, do not add GST.
Business.gov.au says to use competitor prices as a guide but not copy them, and to review prices at least once a year or when costs or market conditions change.
Common questions
- What is a charge-out rate?
- It is the hourly price you charge for labour. For it to work, it has to recover the cost of the time, your overheads and your profit target across the hours you can actually bill, not every hour you work.[1]
- How are labour charge-out rates calculated hourly?
- Business.gov.au says to calculate all business costs at an hourly rate, including wages, superannuation, leave entitlements and taxes. Divide the total annual cost by the hours you expect to bill, then add your profit target.[1]
Official sources
Checked 16 October 2026. Rules can change; use these sources to check the requirements for your job.
Related guides
- How do materials markup and profit margin differ?
- How do I cost a trade job before quoting?
- Free quote template for Australian tradies
Job workflows for plumbers, electricians, HVAC businesses, builders.
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