Ask a tradie how they set their hourly rate and the honest answer is usually: “It’s about what everyone else charges.”
Which means the whole trade is copying each other, and if the first person got it wrong, everyone downstream is wrong too.
Here is how to build the number from the ground up.
The problem that sinks most rates
Billable hours are not working hours. This single fact explains most under-priced trade businesses in Australia.
A typical week for a working tradesperson:
| Activity | Hours |
|---|---|
| On the tools, billable | 28 |
| Travel between jobs | 6 |
| Quoting and site visits | 4 |
| Chasing materials and suppliers | 2 |
| Admin, invoicing, chasing payment | 3 |
| Warranty and callbacks | 1.5 |
| Total worked | 44.5 |
| Billable ratio | 63% |
If you set your rate assuming 44 billable hours and actually bill 28, you have under-recovered by 37% before you have made a single other mistake.
Every hour of your rate must carry 1.6 hours of your week. That is the arithmetic that most rate-setting ignores.
Build it from the bottom
Step 1 — Your true labour cost
For yourself, start with what you should be earning, not what is left over. If a comparable role pays $95,000, that is your baseline — not the $52,000 you have quietly been taking.
For an employed tradesperson:
| Line | Annual |
|---|---|
| Base wage (award or above) | $85,000 |
| Superannuation at 12% | $10,200 |
| Payroll tax (if above state threshold) | $4,250 |
| Workers compensation (trades ~4–6%) | $4,250 |
| Annual leave loading | $1,140 |
| Public holidays, sick leave (unproductive paid time) | ~$6,500 |
| True labour cost | ≈ $111,340 |
Award rates rose 4.75% and the minimum wage 5.97% from 1 July 2026 — so if your rate has not moved since last financial year, this line already grew and your rate did not.
Step 2 — Vehicle and fuel
| Line | Annual |
|---|---|
| Finance or depreciation | $9,000 |
| Insurance and registration | $3,200 |
| Fuel (25,000km @ 12L/100km) | $6,150 |
| Servicing, tyres, repairs | $2,800 |
| Vehicle total | ≈ $21,150 |
Fuel excise returned to 53.7c/L on 3 August 2026 — a 17.1c step-up from July, worth about $513 a year per ute in excise alone. Small individually, real across a fleet, and pure margin either way.
Step 3 — Tools, plant and consumables
Tool replacement and repair, small plant, test equipment, calibration, PPE, consumables not charged to jobs. $4,000–$9,000 per tradesperson annually. Most businesses under-estimate this because it arrives in small amounts.
Step 4 — Overheads
Insurance (public liability, professional indemnity, tools), licensing and registration, phone and software, accounting, marketing, workshop or yard, admin support, bad debts.
$18,000–$45,000 annually for a small trade business, divided across your chargeable people.
Step 5 — Profit
Not what is left over. A line item, decided in advance. 15–25% on top of full cost is a reasonable target for a trade business carrying real risk.
If profit is whatever remains after everything else, the answer will be “not much” every year.
Putting it together
One tradesperson, 46 billable weeks a year, 28 billable hours a week = 1,288 billable hours.
| Line | Annual |
|---|---|
| True labour cost | $111,340 |
| Vehicle | $21,150 |
| Tools and consumables | $6,500 |
| Overhead share | $28,000 |
| Total cost | $166,990 |
| Break-even rate | $129.65/hr |
| + 20% profit | $155.58/hr |
Call it $155 an hour.
Now compare that to what you are actually charging. For a lot of Australian trade businesses this is an uncomfortable moment — and it explains why being flat out all year does not translate into money in the bank.
Where the rate quietly leaks
Not charging for travel. Six hours a week is 13% of your working time. Either build it into the rate or charge a call-out fee. Absorbing it is a decision to work an unpaid day a fortnight.
Not charging for quoting. Four hours a week. On complex quotes, charge for them and credit it against the job if won. The customers who object to a quoting fee are disproportionately the ones who were never going to proceed.
Verbal variations. The single largest margin leak in Australian trades. Work performed on a verbal instruction, invoiced later, disputed, discounted, written off. No written variation, no work. One uncomfortable conversation beats losing the margin on the job.
Materials at cost. You carry the cash, the sourcing time, the delivery risk and the warranty. A 15–25% margin on materials is standard and defensible.
Callbacks and warranty. Budget for them explicitly. Pretending they will not happen does not stop them happening.
Round-downs. The 3.2 hours that becomes 3. Across a year that is weeks of unpaid work.
The day rate question
Day rates are simpler to sell and easier to get wrong. Build the day rate from your hourly rate, not the other way around, and be explicit about what a day means.
$155/hr × 8 hours = $1,240. If you are quoting $900 days because “that’s the going rate,” you are subsidising your customers by $340 a day.
What to do this month
1. Work out your actual billable ratio. Track a fortnight honestly. Most tradies guess 80% and discover 60–65%.
2. Rebuild your rate from the bottom using your real numbers, not the industry’s.
3. Move new quotes to the new rate immediately. New customers have no reference price. This is the least confrontational money available to you.
4. Move existing customers with 30 days notice, anchored to something verifiable — award rates rose 4.75% on 1 July, fuel excise went back to 53.7c on 3 August, insurance is up as much as 60% since 2019. These are checkable facts, not excuses.
5. Hold it. The rise is not the hard part. The quiet discount three months later is what unwinds it.
The bigger picture
Construction and trades account for the largest share of Australian insolvencies — 3,472 external administrations in the most recent year. Almost none failed for lack of work.
They failed because the work was priced before the costs were known, or priced by copying someone else who had also guessed.
Being busy is not the same as being profitable. If you have been flat out for two years and the bank balance has not moved, the rate is the reason.
Where to go next
- Vehicle and Fuel Costs for Trade Businesses
- Fuel Excise Cost Calculator
- How to Raise Prices Without Losing Customers — scripts you can send
- Why Australian Builders Go Under With a Full Order Book
- The Profit Lever Hierarchy
Sources: Fair Work Commission Annual Wage Review 2026; Department of Infrastructure fuel excise fact sheet; ASIC insolvency statistics FY2025-26; AMP Bank GO Small Business Cost Pressure Index 2026. Cost figures are illustrative and vary by trade, state and business size. Award rates, payroll tax thresholds and workers compensation premiums differ — confirm your own figures.