Workers Compensation

Are you covered by workers compensation as a sole trader or contractor?

By LHD Lawyers

In 2021, the Australian Bureau of Statistics reported over one million independent contractors, which equates to nearly 8% of the working population. As the number of sole traders (exclusive owners of a business) and contractors (workers hired on a project basis) increases each year, these workers need to educate themselves on their rights and responsibilities regarding workers’ compensation.

Workers’ compensation workers who have been injured may be entitled to  payments of weekly compensation and payment of medical expenses to assist in their treatment and recovery. If you are unaware of what workers’ compensation entails as a sole trader or contractor, review the information below to understand:

  • What you are entitled to;
  • The logistics behind workers’ compensation for sole traders and their employees;
  • How worker’s compensation differs from state to state; and
  • How to make a claim

Are sole traders entitled to workers’ compensation?

Workers’ compensation supports employees injured at work or who become sick due to their work. As sole traders are not considered employees, they are not personally covered. However, there are avenues in place to protect them should work-related sickness or injury result in revenue loss. One solution is investing in income protection insurance, which covers a sole trader’s potential loss of income if they become sick or are injured.

Do sole traders need workers’ compensation insurance for their employees?

Once a sole trader expands and begins to hire employees, it becomes mandatory that they invest in workers’ compensation to cover any potential injuries, medical expenses or loss of wages for their employees.

Sole traders may also consider taking out life, trauma and total permanent disability insurance for added protection for themselves and their employees.

Can contractors claim workers comp?

Yes, contractors and subcontractors can be considered employees or deemed employees. This will require consideration and analysis of the relationship and working circumstances between the parties and may not simply turn on the characterisation of the parties in the contract. If the indicia of an employer-employee relation are satisfied, or a deemed worker relationship is made out, a contractor or subcontractor will be able to claim workers’ compensation from their employer or deemed employer if they are injured or fall sick while working for them.

Workers compensation rules by state for sole traders and contractors

Workers’ compensation rules and regulations differ across states and territories, and understanding how these states and territories deal with it is crucial. Here is a breakdown:

New South Wales

  • In NSW, sole traders must provide workers’ compensation cover to workers, including contractors, who have entered into a service or training contract. The industry they work in or type of occupation is not a factor, neither is whether or not the agreement was expressed, implied, written or even verbal.


  • In VIC, anyone who works under a contract must be covered by workers’ compensation. This includes students undertaking workplace training and TAFE students undertaking work placement. However, paid workers who earn less than $7,500 annually are not covered by compensation.


  • In QLD, sole traders must cover employees such as contractors with workers’ compensation, and they must also maintain an Accident Insurance Policy to cover their workers against injury or illness.

Western Australia

  • In WA, sole traders must cover workers including contractors with compensation benefits if they are injured while working for them, regardless of their contract type.


  • In TAS, all employees who enter into or work under a contract or training agreement are covered by workers’ compensation, regardless of the type of contract offered by the sole trader.

Northern Territory

  • Workers’ compensation claims are managed by a government program called WorkSafe, where workers’ compensation is privately underwritten. Sole traders are able to choose between policies that offer different benefits and have varying costs.

South Australia

  • Anyone who is working under a contract is covered by workers’ compensation – unless they earn less than $12,426 in a financial year. When that’s the case, the sole trader is required to sign up for a Minimal Workers Compensation policy.

Is workers’ compensation mandatory for sole traders NSW?

It is compulsory in NSW to have a workers’ compensation policy if you enter agreements with workers or contractors who are deemed workers and are paid more than $7,500 a year in wages. This also includes apprentices and trainees who work for a sole trader.

Make a workers’ compensation claim today

LHD Lawyers help everyday Australians receive the benefits they’re entitled to for workers’ compensation claims. We are so sure of our abilities to win your case that we stand firmly by our No Win No Fee Policy: if we don’t win, you don’t pay. Call 1800 455 725 for a no-obligation consultation about your case.

Author: Jamie Nemme


Original Publish Date: April 7, 2022

Last Updated: April 29, 2024

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