Workers compensation insurance does not cover a sole trader: business.gov.au describes it as protection for employers and employees, with figures checked 1 October 2026. A sole trader can instead consider private accident and sickness insurance for lost income while recovering, or income protection for part of their income if illness or an accident prevents work, alongside personal death, illness and disability cover.
Why doesn’t workers compensation cover a sole trader?
The business guidance says businesses with employees may need workers compensation insurance and that employers must obtain it from an authorised insurer. Its stated purpose is to cover employers and employees against financial hardship when work causes injury or sickness.
A sole trader is not covered by this insurance. That leaves a potentially important gap: illness or injury may prevent the trader from working and earning, but workers compensation will not provide the employer-and-employee protection described in the guidance.
Independent contractors may also need their own insurance. A business engaging a contractor should check with the workers compensation regulator in its state or territory because the laws vary.
What can accident and sickness insurance or income protection do?
The two options described by business.gov.au have different focuses:
| Option | What the guidance says it can do |
|---|---|
| Private accident and sickness insurance | Pays lost income while you recover |
| Income protection | Covers part of your income when sickness or an accident prevents you from working |
Income protection therefore cannot replace the income a sole trader would have earned, but it can provide a form of financial support when work is prevented by a covered event. The exact response depends on the policy, so check the product disclosure statement rather than assuming every policy with a similar name works in the same way.
What does personal death, illness and disability insurance add?
A sole trader can consider this cover alongside income protection. Business.gov.au identifies several forms:
- Life insurance pays a lump sum or series of payments if you become terminally ill or die.
- Total and permanent disability insurance pays a lump sum if you become permanently disabled before retirement.
- Trauma insurance pays a lump sum for a specified life-threatening illness.
These policies address different circumstances. They should be assessed alongside accident, sickness or income protection rather than treated as a single automatic response to every risk facing the business.
Does income protection cover my business risks too?
Income protection has a narrower role: it is described as covering part of your income if you cannot work because of sickness or an accident. Other business risks may need separate consideration.
For example, public liability insurance relates to claims arising from injury, death or property damage caused by negligence. Portable equipment insurance can cover accidental loss, damage or theft of tools and electrical equipment taken to a job, while business interruption insurance can help with ongoing business costs after an insured event interrupts the business.
The insurance required by law depends on the type of work. Some states and territories require public liability insurance for certain occupations, so a sole trader should check both personal and business requirements rather than assuming workers compensation resolves either side.
Who should I check about coverage and compliance?
Workers compensation laws vary by state or territory. The regulator for each jurisdiction is:
| State or territory | Workers compensation regulator |
|---|---|
| Australian Capital Territory | WorkSafe ACT |
| New South Wales | State Insurance Regulatory Authority |
| Northern Territory | NT WorkSafe |
| Queensland | WorkCover Queensland |
| South Australia | ReturnToWorkSA |
| Tasmania | WorkSafe Tasmania |
| Victoria | WorkSafe Victoria |
| Western Australia | WorkCover WA |
The regulator can explain compliance requirements and how to obtain workers compensation insurance. Business.gov.au also advises seeking professional advice about which insurance a business needs by law. Further advice may be available from a licenced insurance broker, insurer or business adviser.
An authorised general insurer can be found on the Australian Prudential Regulation Authority’s register, while an insurance broker’s licence can be checked on the Australian Securities and Investments Commission’s professional register.
This is general information, not financial or legal advice. Check the regulator page for your state or territory and the product disclosure statement for any policy you are considering.
Sources
FAQ
Does workers compensation cover a sole trader?
No. The business.gov.au guidance expressly says workers compensation insurance does not cover a sole trader and describes the cover around employers and employees.
Is private accident and sickness insurance the same as income protection?
The guidance describes them differently. Accident and sickness insurance is presented as paying lost income while you recover, while income protection covers part of your income when sickness or an accident prevents you from working. Check each product disclosure statement for its specific coverage.
What other cover should a sole trader consider?
Consider personal death, illness and disability insurance alongside an income-related policy. Depending on the work, separate business cover such as public liability, portable equipment or business interruption insurance may also be relevant.
What should a business check when engaging a contractor?
Independent contractors may need their own insurance. The business should check with the workers compensation regulator in its state or territory because requirements and laws differ by jurisdiction.
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