PAYG vs ABN in 2026: $40/hr vs $45/hr — Which Pays More After Tax?
$45/hr ABN looks fatter than $40/hr PAYG until you do the maths. Sydney 2026 side-by-side — tax, super, comp, sick leave, the lot.
- PAYG $40/hr: ~$69k net cash + $9,485 super + paid leave included 💰
- ABN $45/hr: ~$65k net after super, comp, accountant, and insurance gaps
- Break-even is $52-$54/hr ABN — not $45
- ABN traps: no sick leave, no workers comp, quarterly tax bills, invoice chasing
- Single-site labour hire + one foreman directing you = likely sham contracting
$45/hr ABN looks $5 better than $40/hr PAYG. After the maths, it isn't. Tax, super, sick leave, public holidays, workers comp — these don't disappear on ABN, they just become your problem. This is the side-by-side breakdown Sydney construction workers actually need.
Table of Contents
- The Headline Numbers
- The PAYG Pay Stack
- The ABN Pay Stack
- Side-by-Side: 38 Hours, 48 Weeks
- The Hidden Costs No One Mentions
- When ABN Actually Wins
- Sham Contracting — How To Spot It
- The 30-Year Super Gap
- Get Started
The Headline Numbers
Two Sydney workers. Both doing TA work for a labour hire mob. Both work 38 hours a week, 48 working weeks a year (because annual leave + public holidays eat the other four).
PAYG worker on $40/hr: gross $72,960 a year. Plus 12% super on top: $8,755. Plus four weeks paid annual leave. Plus ten sick days. Plus eleven public holidays. Plus workers comp coverage. Plus PAYG tax withheld weekly so no surprises in October.
ABN sole trader on $45/hr: gross $82,080 a year — if you actually work all 48 weeks. No super unless you pay yourself. No sick leave. No annual leave. No public holidays. Workers comp gap. PAYG instalments quarterly. GST registration if you cross $75k.
On the surface, $9,120 more on ABN. On the maths, it's the other way round.
The PAYG Pay Stack
Here's what $40/hr PAYG actually looks like through a Sydney labour hire agency in 2026.
Hourly rate: $40/hr. Weekly hours: 38. Weekly gross: $1,520. Over 52 weeks that's $79,040 — but you only physically work 48 of those weeks because four are paid leave.
The other things that turn up automatically:
- Superannuation: 12% of ordinary time earnings, paid into your fund. That's $9,485 a year, sitting there compounding for retirement. From 1 July 2026 the agency has to pay it on payday — same day as your wages — under the new Payday Super rules from the ATO.
- Workers compensation: covered by the labour hire agency's icare NSW policy. If you fall off a scaffold, you're covered for medical, weekly payments and rehab. Zero cost to you.
- Annual leave: four weeks paid. That's $6,080 in your account while you're at the beach.
- Sick leave: ten days a year. $1,520-ish of paid recovery time when the flu hits.
- Public holidays: eleven a year in NSW. About $3,344 paid for days you're not on site.
- Long service leave: even casual labour hire workers in NSW construction can claim through the Long Service Corporation after seven years.
Tax goes out weekly. PAYG withholding tables do it for you. You file your return in July, usually get a few hundred back.
Net cash in your account, year one: roughly $69,000 after tax. Plus $9,485 super you can't touch yet. Plus paid leave already counted in the gross.
The ABN Pay Stack
Same job. Same hours. Same site. But you've got an ABN and the agency pays you $45/hr.
Hourly rate: $45/hr. Weekly hours: 38. Weekly invoice: $1,710. Working 48 weeks because there's no paid leave — you stop, you don't get paid. Annual invoiced: $82,080.
Now subtract what PAYG gets for free:
- Super you should pay yourself: 12% to keep up with your PAYG mate. That's $9,850 out of pocket. Most ABN tradies don't pay it. Many retire broke because of it.
- Workers comp gap: icare NSW is clear — a sole trader cannot insure themselves for workers comp. You'll need a personal accident + income protection policy. Budget $1,500-$3,000/year depending on age and trade.
- Public liability insurance: $700-$1,200/year for a TA or general construction sole trader.
- No sick leave: get gastro, lose $304 a day. Lose four days, lose $1,216.
- No public holidays: ANZAC Day off? That's $304 you didn't earn.
- No annual leave: take two weeks at Christmas? $3,040 gone.
- Accountant fees: BAS + tax return + GST = $800-$1,500/year for a basic sole trader.
- GST registration: required once you cross $75,000 turnover. You charge 10% extra (the agency wears it) but the admin is yours.
💡 The ABN trap: every dollar of "extra" hourly rate is meant to cover what your boss isn't paying anymore. $45/hr ABN that doesn't bank 12% super and dodge a $0 income week is a $45/hr that's actually worth about $36/hr in real, PAYG-comparable terms.
Side-by-Side: 38 Hours, 48 Weeks
Real numbers, no fluff. Both blokes working a Sydney site, May 2026.
The PAYG bloke wins by about four grand. Then add the $9,485 super he banks that the ABN bloke didn't. Over a 30-year working life, that super gap alone compounds into hundreds of thousands.
Same site, same boots, same hours — the bloke on lower hourly is winning on every line that matters.
The Hidden Costs No One Mentions
The $4,000 cash gap is the obvious part. Here's the stuff that gets overlooked.
Invoice chasing
PAYG workers get paid weekly, every Thursday, no chasing. ABN sole traders send invoices. Some agencies pay net 7. Some pay net 14. Some forget. You've now got a side-job called "chasing your own wages" that pays $0/hr.
Cash flow on a slow week
Wet weather Monday-Wednesday. PAYG bloke shows up Thursday, still gets sick leave or RDO arrangement. ABN bloke shows up Thursday, invoices 16 hours, eats two days of bills.
The October tax shock
PAYG tax is withheld every week. No bill in October. ABN tax is your problem — most first-year sole traders blow the lot and get a $12,000-$18,000 bill they can't pay. The ATO will set up a payment plan but interest applies.
Super you'll never bank
The 12% Super Guarantee on PAYG isn't optional for your employer. On ABN it's optional for you. Nine out of ten ABN tradies don't pay themselves super. The ATO Super Guarantee rules confirm sole traders aren't required to contribute — but the maths is brutal at 65.
The injury you didn't see coming
You drop a beam on your foot. PAYG: icare claim, weekly payments, surgery, rehab. ABN sole trader: hope your personal accident policy paid out, hope your income protection waiting period is short, hope you weren't subbing on a site where coverage is murky.
When ABN Actually Wins
ABN isn't always wrong. Three cases where the maths flips.
Case one: rate is high enough
Above $52-$54/hr ABN, the loadings catch up and the ABN bloke pulls ahead. Specialist trades — formworker leading hand, qualified concreter foreman, dogman with crane ticket — can pull these rates. General TAs, demo crew, and basic warehouse roles can't.
Case two: multiple clients, real business
If you're a genuine contractor — multiple sites, multiple clients, your own gear, you decide the hours, you can knock back jobs — ABN works because you're running a business. The ATO's contractor vs employee test looks at exactly this: who controls the work, who carries the risk, whose tools are on site.
Case three: short, finite, specialist work
Three-week scaffolding shutdown for a high-rise. You quote a price, deliver, leave, invoice. That's contracting. That's not turning up to the same site every Monday for two years on an ABN — that's PAYG dressed up to dodge super.
Sham Contracting — How To Spot It
This is the bit no one in the labour hire game wants you to read.
Since 26 August 2024, the Fair Work Closing Loopholes reforms changed the test. It used to be "recklessness" — your boss had to be obviously dodgy to lose a sham contracting case. Now it's "reasonableness" — your boss has to prove they had reasonable grounds to believe you were a contractor at the time they hired you.
The ATO received more than 7,000 tip-offs about the building and construction industry in 2024-25. About 20% involved sham contracting allegations. Construction is the most-investigated sector.
Signs you're being sham-contracted:
- You turn up to the same site every week, same hours, same foreman
- You use the host's tools and gear, not your own
- You can't knock back work or send a replacement
- You only have one client
- Your "rate" is structured to look slightly higher than PAYG to disguise that you're paying your own super, comp, leave
If three or more of those apply, you're likely an employee in the eyes of Fair Work and the ATO — regardless of what your "contractor agreement" says. The agency can be fined and you can claim back super, leave entitlements and tax that should have been withheld.
Cash jobs — paying a construction worker in cash and skipping PAYG withholding, super, and workers comp — are illegal under Fair Work and ATO rules. No workers comp coverage means if you're injured, the host PCBU wears the liability directly. Sham contracting penalties run up to $93,900 per breach for companies in 2025, and the ATO penalises both the worker and the engager. Not worth the risk on either side.
What to do about it:
- Ask the agency in writing about your engagement type. A legit labour hire mob that engages workers as PAYG employees by default will confirm this clearly.
- If they refuse or stall, lodge a tip-off with the ATO sham contracting hotline.
- Call Fair Work on 13 13 94 for free advice on your status.
- Don't sign a new "contractor agreement" without reading it. The Closing Loopholes reforms mean what's on paper matters less — but signing makes the dispute harder.
$5 extra an hour is not worth $9,485 of super, $6,080 of annual leave, and a workers comp gap that costs you a foot.
The 30-Year Super Gap
📊 Here's the bit that hurts most. The 12% your boss tips into your super every fortnight isn't just numbers on a payslip — it's compounding cash for the back end of your career.
A 25-year-old PAYG worker on $40/hr who works 38 hours, 48 weeks a year, gets $9,485 a year going into super. Assume a balanced fund returning 7% per year after fees. By 65, that pot is worth roughly $1.95 million in today's dollars — before any voluntary top-ups.
The same 25-year-old on $45/hr ABN, banking no super because most don't, retires with $0 from those years.
The bloke who shows up to a Sydney site every Monday for 40 years on PAYG retires with a paid-off house, $1.9m in super, and a Medicare-supported back surgery if his knees gave up. The ABN bloke retires on the pension and whatever cash he saved.
Honest disclosure: Leap is a labour hire company. We engage workers as PAYG employees by default. That doesn't mean ABN is wrong for everyone — it means it's wrong for most labour hire workers who only have one client (us) and follow a foreman's directions all day. If you're a real contractor with three sites and your own ute full of gear, that's a different conversation.
The point of this article isn't to talk you out of an ABN. The point is to make sure that if you stay on one, you're at least running the maths properly — paying yourself the 12% super, holding income protection, putting aside tax weekly, and quoting rates that cover the gap. Most don't. That's not a Leap problem — that's a maths problem.
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Leap is a Sydney labour hire mob. Construction and warehouse. We engage workers as PAYG employees. We carry the icare NSW workers comp, we pay 12% super, and you get sick leave and public holidays counted in your hours.
If you're sitting on an ABN gig that doesn't smell right — or you just want a straight PAYG number — see what's going.
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Want to read the full pay picture? Start with the parent guide: The Sydney Labourer's Pay Guide: What You'll Actually Take Home. Or dig into labour hire vs recruitment agency and is labour hire worth it for the bigger picture.
Frequently Asked Questions
Is $45/hr ABN better than $40/hr PAYG in Sydney?+
Not on the maths. After 12% super, workers comp, public holidays, sick leave and annual leave, the $40/hr PAYG worker takes home about $69,000 net while the $45/hr ABN sole trader nets around $65,000 — and that's before chasing invoices.
Do I have to pay my own super on ABN?+
Yes — well, no one's forcing you, but you should. Sole traders aren't legally required to contribute super, but if you don't, you retire with nothing from your trade years. The Super Guarantee is 12% from 1 July 2025. You'd need to set aside that much yourself to match a PAYG mate. Most ABN tradies don't.
Does a labour hire agency pay workers comp for ABN workers?+
Sometimes. icare NSW says an ABN by itself doesn't decide your status — you can still be a 'deemed worker' covered by the host's policy in construction. But you cannot insure yourself as a sole trader. If the host disputes coverage after an injury, you're exposed. PAYG removes the ambiguity.
What is sham contracting and how do I know if it's happening to me?+
Sham contracting is when a business tells you you're a contractor when you're actually an employee — usually to dodge PAYG tax, super and entitlements. Since 26 August 2024 the test is 'reasonableness', not 'recklessness'. If you turn up to one site, follow the foreman's directions and use their gear, you're likely an employee no matter what your ABN says.
Can I switch from ABN back to PAYG with the same labour hire mob?+
Most Sydney agencies engage workers as PAYG employees by default. If you're currently on ABN with an agency, ask them in writing about your engagement arrangement. If they can't or won't explain it, ring Fair Work on 13 13 94 for free advice on your employment status.
What about $50/hr or $55/hr ABN — does the maths flip?+
It can. The break-even on $40/hr PAYG is roughly $52-$54/hr ABN once you load 12% super, workers comp, annual + sick + public holiday loading, and a fair business-overhead allowance. Anything below that and PAYG wins on the cash, by a fair margin.
