Workers Compensation Australia: Who Counts as a Worker

Say you run a tiling business in Albury, on the New South Wales side of the Murray. Your two employees spend most weeks on jobs across the river in Wodonga, in Victoria. You have also taken on a subcontractor who works only for you, on your jobs and at the hours you set. The example is illustrative, but its questions are real. Which scheme covers your staff? Is the subcontractor your worker? And what is your premium calculated on? Workers compensation in Australia has no single answer to any of them.

There is a scheme for each state and territory, plus three Commonwealth schemes, and Safe Work Australia says each is governed by different laws. The same questions arise under all eight state and territory schemes; the answers below come from New South Wales and Victoria, the two states your Albury business straddles.

Workers compensation is insurance for your liability when a worker is injured at work. For an employer it is compulsory, not optional. In New South Wales, the duty to hold a policy is in section 155 of the Workers Compensation Act 1987. The NSW guidance quoted below comes from icare, the state insurer. In Victoria, the Workplace Injury Rehabilitation and Compensation Act 2013 makes employers register with WorkSafe Victoria and pay a premium. Both Acts exempt the smallest employers, as the section on who does not need cover explains.

Which workers compensation scheme covers your staff

When staff work in more than one state, as yours do, the schemes across Australia use the same national cross-border model to decide which one applies. Three tests, applied in order, connect each worker’s employment with one state or territory:

the state or territory where the worker usually works in that employment;
if that gives no answer, the state or territory where the worker is usually based for that employment;
if neither gives an answer, the state or territory where your principal place of business in Australia is.

The test applies to each worker, not to the business. For the Albury tiler, that means asking, person by person, where each employee actually spends the working week, and answering from the job records. Victoria is likely to be the state of connection for employees who usually work in Wodonga, even though the business is in Albury. Victoria has placed premium liability on employers for workers connected with Victoria since July 2005, so before either declaration goes in, check with both insurers which policy those wages belong in.

When a subcontractor counts as your worker

In New South Wales, icare’s guidance says you do not have to insure contractors unless they are deemed workers: people the scheme treats as workers even though you engaged them as contractors. Schedule 1 of the Workplace Injury Management and Workers Compensation Act 1998 lists the classes, including contractors under labour hire service arrangements. The insurer also warns that contractors or subcontractors can count as workers even when you do not hire them directly.

icare’s guidance lists factors that point each way, and no single one decides the question. Read your own subcontractor against it row by row.

Points towards a contractor	Points towards a worker
Engaged for a particular task, using their own skill and judgment	Directed on what work to do, and when and how to do it
Employs others, or delegates or sub-lets the work	Required to carry out the work personally
Paid on a quote for the job	Paid by the hour or the week
Supplies their own tools and materials	Uses tools and materials the employer supplies
Runs an independent business under their own or a business name	Works for one employer only, or has PAYG tax arrangements

An Australian Business Number (ABN) on the invoice does not settle anyone’s status. Tax status, as icare puts it, “bears no direct relationship” to workers compensation status.

How Victoria decides

With jobs on both sides of the river, it is worth knowing Victoria’s test as well. WorkSafe Victoria asks two questions about any contractor, whatever their business structure. Do you have the legal right to control not only the result of the work, but also what work is done and how? And does their business depend on you for its existence? If both answers are no, the contractor is unlikely to be your worker. For a subcontractor who works only for you, at hours you set, neither answer is an easy no.

Incorporating does not take a contractor out of the question either. WorkSafe Victoria says a contracting company, or a trust with a corporate trustee, that depends on one business for its existence may count as that business’s deemed worker, unless it is an owner-driver business. You would then count what you pay that company as your own remuneration.

Back in Albury, your subcontractor sits closer to the worker column of icare’s table. Assess that arrangement properly rather than guess, because the answer changes what goes into your wage declaration.

What your workers compensation premium is calculated on

In New South Wales, the premium starts with the wages you declare. It is the figure your bookkeeper or payroll person will be asked for, so know what feeds it. The insurer, icare, gives each business an industry classification (WIC) based on its main activity, and each classification’s rate reflects the claims and safety performance of the employers in it. At renewal, check that the classification still describes the work you mainly do. Your wages multiplied by that rate give the first figure. At $30,000 or less you are a small employer, and the number of claims you make does not change your premium. Above that, the premium is experience-rated.

Declared wages cover more than pay: overtime and allowances, bonuses and commissions, leave payments, working directors’ pay and super contributions, including the super guarantee. GST does not count. Hand this list to whoever prepares the declaration; the gross-wages line alone can come up short. For a contractor who is a deemed worker, icare’s wage declaration guidance says to declare the labour component and the full contract value.

You give an estimate of wages when the policy starts and at each renewal, then settle up afterwards: within four months of the end of each policy period, you declare actual wages, and icare may adjust the premium. If you do not declare, your estimated wages at the next renewal may rise by 30%. For policies renewing on or after 30 June 2026, a late declaration also costs you the Safe Employer Reward, a discount of up to 7.5%, even if you meet its other criteria. The State Insurance Regulatory Authority can request a wage audit covering up to the last five years.

How Victoria sets the premium

Across the river, WorkSafe Victoria works out the premium each year from your estimate of remuneration and your claims statement. Remuneration covers wages and other benefits, plus payments to any contractor who counts as your worker. WorkSafe Victoria says to tell your agent within 28 days if remuneration rises, or is likely to rise, 20% or more above your estimate. Underestimating can attract penalties. If the Wodonga work picks up, and the overtime with it, that is the kind of rise to watch for.

Who does not need workers compensation insurance

Does any of this apply if it is just you and the odd helper? Possibly not. The smallest employers are exempt, on terms that vary by state, and in both states taking on an apprentice ends the exemption.

New South Wales. You need no policy if all three apply: you pay $7,500 or less in wages in a financial year, hire no apprentice or trainee, and are not part of a group of businesses. You must still act if someone is injured working for you. A claim against an exempt employer carries a $175 administration fee.
Victoria. You need not register if you have no apprentices and are not liable to pay more than $7,500 in remuneration in a financial year.

With two employees on the books, the Albury tiler should check these thresholds against the payroll before relying on them. If you work alone as a sole trader or partner and employ nobody, you need no policy in either state. New South Wales does not let you cover yourself, and icare suggests personal accident and illness cover or income protection instead. In Victoria, trading through a company that employs you changes the position. You are then your company’s worker, and the company needs to register.

Keep the reasoning behind every contractor decision

In New South Wales, deciding that a contractor is not a deemed worker is not the end of it. For each contractor, keep any documents you relied on to leave their payments out of your declared wages for five years. The State Insurance Regulatory Authority’s Worker or Contractor tool guides the assessment.

Business owner holds a blue ring binder at a home office desk beside a laptop and calculator — Records made while the job is running are easier to rely on years later.

The factors in icare’s table tell you which records help: the quote the subcontractor worked to, who set the hours, whose tools and materials were used and whether they worked for anyone else. Those facts are easy to note while the job is running and hard to rebuild five years later. Our guide to the job file works through that habit on plumbing jobs, where the risk is a payment dispute rather than a wage audit, but the habit is the same one.

Checklist before your next wage declaration

The rules quoted here come from New South Wales and Victoria. In another state or territory, work through the same questions, but confirm the figures and deadlines with your own scheme.

Find each employee’s state of connection: where they usually work, then where they are based, then your principal place of business.
If some employees’ state of connection is another state, confirm which policy their wages belong in before you declare.
List every contractor and subcontractor you paid. In New South Wales, test each against icare’s factors or the SIRA tool. In Victoria, ask WorkSafe’s two questions.
Declare deemed workers: the labour component and full contract value in New South Wales, and their payments as remuneration in Victoria.
For each contractor you leave out in New South Wales, keep the supporting documents for five years.
Check the $7,500 exemption, and remember that hiring an apprentice or trainee removes it.
Diary the deadlines: four months to declare actual wages in New South Wales, and 28 days to report a 20% rise in Victorian remuneration.

ON EVERY SUBCONTRACTOR DECISION

You have to keep the reasoning for five years. Most of it never left anyone’s head.

Whether a subcontractor was your worker often comes down to facts from the job, like who set the hours and who assigned the work. SendWork keeps each job’s schedule, crew assignments and notes in one place, so who worked where, and when, is on record while the work happens.

See how Australian trade teams keep crews and jobs in sync →