Workers compensation is one of those things many sole traders don't think about until they hire someone, or until they get hurt and find out they're not covered. The rules are set by each state and territory, so what applies to a tiler in Melbourne isn't quite the same as for a sparky in Brisbane.
This guide explains what workers compensation is, when a small trade business needs a policy in each state and territory, why contractors can count as workers, and what sole traders can do to protect their own income. It's general information, current as at November 2026.
What workers compensation is
Safe Work Australia's workers' compensation page describes it as insurance that offers a safety net if a worker is injured or becomes ill because of work. Depending on the injury, it can cover part of their wages while they recover, medical and rehabilitation costs, and lump sums for permanent impairment or death.
Under Australian law, employers must have insurance to cover their workers. There are separate schemes for each state and territory, plus Commonwealth schemes, and each runs under different laws.
Why it matters in the trades
Construction is a higher-risk industry. Safe Work Australia's Key Work Health and Safety Statistics 2026 recorded about 17,200 serious workers compensation claims in construction in 2024–25 (preliminary), 11.7% of the national total. A serious claim is one with a week or more off work.
Serious workers compensation claims per million hours worked, by industry, 2024–25
Construction recorded 8.8 serious claims per million hours worked in 2024–25 (preliminary), above the all-industries average of 6.7.
Show the figures as a table
| Industry | Serious claims per million hours worked |
|---|---|
| Agriculture, forestry and fishing | 9.6 |
| Health care and social assistance | 9.5 |
| Manufacturing | 9.4 |
| Transport, postal and warehousing | 9.1 |
| Construction | 8.8 |
| All industries | 6.7 |
| Retail trade | 5.6 |
If one of your workers is seriously hurt and you're not insured when you should be, you can face penalties and be personally liable for their costs. The premium is almost always the cheaper option.
Do you need a policy? State by state
Workers compensation for small trade businesses, state by state
In every state and territory, employers must insure their workers. Sole traders and partners with no workers generally don't need a policy, and can't cover themselves under one.
| State | When you need a policy | Covering yourself | Source |
|---|---|---|---|
| NSW | Generally once you employ staff and wages exceed $7,500 a year, or you employ an apprentice or trainee | Sole traders and partners can't cover themselves under a workers compensation policy | icare NSW, Who needs workers insurance |
| VIC | If you employ workers, unless you have no apprentices and pay $7,500 or less a year in remuneration | No need to register if you're a sole trader or partner with no workers | WorkSafe Victoria, Do I need to register for WorkCover insurance? |
| QLD | All employers must hold accident insurance, generally with WorkCover Queensland | Optional workplace personal injury insurance is available if you work for yourself | WorkCover Queensland, Accident insurance; WorkCover Queensland, Workplace personal injury insurance |
| WA | Employers must cover their workers with an approved insurer | Check the WorkCover WA guidance on who counts as a worker | WorkCover WA, Covering your workers |
| SA | Register with ReturnToWorkSA within 14 days of employing workers (a small remuneration threshold applies) | Some self-employed people and contractors fall into a prescribed class and must register | business.gov.au (ABLIS), Registration of employers – SA |
| TAS | Employers must insure with a licensed insurer | Check with WorkSafe Tasmania | WorkSafe Tasmania, Workers compensation insurance |
| ACT | Employers must hold a policy with an approved insurer | Check with WorkSafe ACT | WorkSafe ACT, Who is an employer, and the employer's obligations |
| NT | Employers must insure with an approved insurer | Check with NT WorkSafe | NT WorkSafe, Employers frequently asked questions |
New South Wales
icare's who needs workers insurance page says you don't need a policy only if you pay $7,500 or less in wages a year, don't hire an apprentice or trainee, and aren't part of a group of businesses. Sole traders and partners can't cover themselves for personal injury under a workers compensation policy, and if you don't employ any staff you don't need one. A Pty Ltd company's working directors count as workers in NSW, so a company paying its director a wage generally needs a policy.
Victoria
WorkSafe Victoria's guide, do I need to register for WorkCover insurance, says you generally must register if you employ workers in Victoria. You don't need to register if you have no apprentices and don't pay more than $7,500 a year in remuneration. Sole traders, partners and individual trustees who don't employ anyone else don't need to register. If your company employs you, you're a worker of your own company.
Queensland
WorkCover Queensland says all employers must hold accident insurance to cover their workers, and in most cases that means a policy with WorkCover Queensland. If you work for yourself, you can take out optional workplace personal injury insurance to cover work-related injury or illness. WorkCover Queensland notes it isn't the same as income protection and doesn't provide 24-hour cover.
Western Australia
WorkCover WA's guide to covering your workers explains that employers must have workers compensation insurance for their workers through an approved insurer, and sets out who counts as a worker.
South Australia
In SA, employers register with ReturnToWorkSA. The Australian Business Licence and Information Service says you must register within 14 days of employing workers, and that some self-employed people and contractors fall into a prescribed class of worker and still need to register. There's a small remuneration threshold, indexed each year, so check ReturnToWorkSA for the current figure.
Tasmania, the ACT and the NT
Employers must insure their workers with a licensed or approved insurer. See WorkSafe Tasmania, WorkSafe ACT and NT WorkSafe for the details, including who counts as a worker.
Contractors can count as workers
This catches out a lot of small trade businesses. Having an ABN doesn't automatically make someone a contractor for workers compensation purposes. Each state has its own test, and some subcontractors are treated as your workers, which means your policy has to cover them and their pay goes into your declared wages.
The factors usually include whether the person is paid for their labour or for a result, whether they can delegate the work, who supplies the tools and materials, and whether they run their own business with other clients. NSW has a worker or contractor tool, and the other regulators publish guidance too.
The same idea applies to super: the ATO says contractors paid mainly for their labour can be employees for super guarantee purposes. Our guide to super for sole traders covers it.
If you use subbies, ask for a copy of their workers compensation certificate (if they employ people) and their public liability insurance, and keep it on file.
Protecting yourself as a sole trader
In most states, a sole trader can't be covered by a workers compensation policy. If you're injured, there's no weekly payment unless you've arranged your own cover. Options include:
- Income protection insurance, which pays part of your income if illness or injury stops you working, on or off the job. The ATO generally lets you claim premiums as a deduction if the policy replaces your income.
- Personal accident and illness insurance, often sold to tradies with a shorter waiting period.
- In Queensland, WorkCover Queensland's optional workplace personal injury insurance.
Read policies carefully: waiting periods, benefit periods and exclusions vary a lot. If you have a complaint about an insurer, the Australian Financial Complaints Authority can help. Our guide to public liability and other insurance for tradies covers the other cover you may need.
Keep good records
Your insurer works out your premium from the wages you declare, so accurate records matter. Keep:
- payroll records for every worker, including apprentices and casuals,
- a list of the contractors you pay, with what they did and how much you paid them,
- copies of your subbies' certificates of currency for workers compensation and public liability, and
- the reasons you treated anyone as a contractor rather than a worker.
icare, for example, says documents you use to support excluding a contractor's wages from your declared wages must be kept for five years. Getting wages wrong can mean a large bill when your insurer audits you, or a worker who isn't properly covered.
When someone gets hurt
If a worker is injured:
- Make sure they get first aid and medical treatment.
- Make the site safe, and don't disturb the scene if it's a serious incident.
- Notify your WHS regulator straight away if it's a notifiable incident, such as a death, serious injury or dangerous incident.
- Notify your insurer within the required timeframe, and keep records.
- Help them return to work safely when they're ready.
Tradie Business includes safety forms, with SWMS, job hazard analysis and incident reports your crew can fill in and sign on their phones. Your SWMS should be in place before high risk work starts: see our guide to SWMS.
Building it into your costs
Workers compensation premiums depend on your industry rate, your wages and your claims history. When you hire, add the premium to your on-costs along with super and leave, and price it into your rates. Our guide to setting your hourly rate shows how. If you're thinking about taking on an apprentice, remember that in NSW and Victoria that alone can mean you need a policy: see hiring your first apprentice.
Tradie Business helps you keep track of your crew's hours with timesheets, which makes declaring wages to your insurer easier. See pricing for the plans.
