Sole trader workers compensation

Compare income protection insurance in Australia

Income protection insurance provides similar protection to workers compensation for sole traders. Here are some products from Finder partners.

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Name	Product	Maximum Monthly Benefit	Maximum % of Income Covered	Maximum Benefit Period	Average Claims Acceptance Rate	Sum Insured	Apply
TAL Accelerated Protection Income Protection Finder Award		$30,000	Up to 70%	Age 65	Data not available	$1,305 million	Get Quote View details	Get up to 70% of your income covered with flexible short and long term benefit periods.	Compare	loading Fetching your data...
AAMI Income Protection		$10,000	Up to 75%	5 years	Data not available	$222 million	Get Quote View details	Take out a new AAMI Income Protection policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.	Compare	loading Fetching your data...
NobleOak Income Protection Finder Award		$30,000	Up to 70%	Age 65	97%	$65 million	Get Quote View details	With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.	Compare	loading Fetching your data...
Medibank Income Protection		$12,500	Up to 70%	5 years	Data not available	Data not available	Get Quote View details	Get a quote in less than 5 minutes. No blood tests or medicals needed. 10% discount for Medibank health members.	Compare	loading Fetching your data...
ahm Income Protection		$10,000	Up to 70%	5 years	Data not available	Data not available	View details	Get a quote in less than 5 minutes. No blood tests or medicals needed.	Compare	loading Fetching your data...

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Why can't sole traders get workers compensation in Australia?

Sole traders in Australia generally cannot get workers compensation because they are not considered employees. As self-employed individuals, they are not covered by workers compensation legislation and are not eligible for workers compensation insurance. Instead, sole traders and contractors need to take out other insurance, such as personal injury or public liability insurance, to protect themselves in case of work-related accidents or illnesses. However, there may be exceptions depending on the nature of the situation, and it's worth consulting with a lawyer or insurance provider to determine the best course of action.

Finder survey: What prompted people to take out income protection insurance?

Workers compensation vs income protection

Workers compensation is specific to workplace-related injuries and illnesses, while income protection is a broader form of insurance that covers a wider range of illnesses and injuries, including those that occur outside of work. Here are some of the key differences between income protection and workers compensation:

Workers compensation:

• Provides cover for injuries or illnesses sustained in the workplace.
• Is designed to protect employers from employee workplace-related claims.
• Is not an all-purpose income protection.
• Pays benefits in a variety of different ways.

Income protection:

• Provides financial support if you can't work due to illness or injury.
• Pays you a percentage of your income (usually around 75%).
• Is a more comprehensive type of insurance.
• Does not require you to prove where your injury or illness occurred.
• Covers a broader range of illnesses and injuries, including those that occur outside of work.

Do you need workers comp for your staff?

Yes, anyone who employs paid workers needs to take out a workers compensation policy. However, the definition of a worker changes from state to state, so you may not always be obligated. For example, contractors (a worker who has their own equipment, is hired to work independently on a specific task and has their own ABN) don't always require you to have workers compensation for them. Your best bet is to speak to a lawyer about your circumstances.

What are the benefits of income protection for sole traders?

As a sole trader, there's a lot of responsibility placed on your shoulders. Income protection is a safety net that can really come in handy if you need to take some time off work. It provides:

• Income replacement. You'll get up to 75% of your income paid into your bank account if you need to stop work for a while due to an injury or illness.
• Total & Permanent Disability insurance. This is often bundled with income protection insurance. It provides additional cover if you become permanently disabled.
• Tax benefits. If you buy an income protection policy outside of your superannuation fund, it's tax deductible, or if funded through your superannuation, benefits paid are taxed at a much lower rate.

How else can sole traders protect their business?

Workers compensation rules in Australia

If you're looking to hire an employee, here's a breakdown of the workers compensation rules in to be aware of. These differ state by state.

• New South Wales

  You are required to provide workers compensation to anyone with whom you have entered into a service or training contract, regardless of industry or type of occupation, and regardless of whether the contract was expressed or implied, oral or written.

• Northern Territory

  Workers compensation in the NT is carried out through a program called WorkSafe. Workers compensation insurance is privately underwritten, and employers can choose between different policies with varying benefits and costs.

  You are required to provide workers compensation to anyone who has entered into a contract or agreement of any kind to provide work or services for you. Exceptions may apply if the worker supplies an Australian Business Number as this may designate them a contractor.

• Queensland

  You are required to provide workers compensation for anyone who works for you under any kind of contract unless they are being paid to achieve a specified result or outcome, have provided all their own trade tools and are liable for rectifying any defects in the work performed.

  What is workplace personal injury insurance?

  • Workplace personal injury insurance is a third type of workplace insurance policy available in Queensland. It is a government scheme conducted through approved insurers.
  • It pays weekly benefits of up to 85% of usual income, medical expenses, rehabilitation costs, travelling expenses, lump-sum payments and death benefits. It does not cover injuries or illnesses sustained when not at work.

• South Australia

  South Australia's workers compensation scheme pays the highest weekly incapacity payments and funeral benefits of any state, but it also has the highest average premiums.

  You are required to provide workers compensation to anyone working for you under a contract of service, as a volunteer or as a self-employed person. You are not required to pay full workers compensation if workers are earning less than $12,426 in the 2016–17 financial year. If they are earning below this threshold and injure themselves, you will be required to sign up for a minimal workers compensation policy.

• Tasmania

  You must provide workers compensation to anyone who has entered into or works under a contract of service or training agreement with you, regardless of the type of contract.

• Victoria

  You are required to provide workers compensation insurance to anyone, including domestic workers and outworkers, who provide work under contract. This includes pupils undertaking workplace training and TAFE students undertaking practical placements. You are not required to take out workers compensation if you expect to pay less than $7,500 per year in remuneration.

• Western Australia

  You are required to provide workers compensation to anyone who works for you under a contract of service regardless of whether the contract was oral or written. This includes workers whose service was implied by industrial awards or agreements and people who work for your business in exchange for any type of compensation.

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Frequently asked questions

• Are sole traders considered employees?

  No, sole traders are not considered employees. As well as not being eligible for workers comp, a sole trader wouldn’t be eligible for paid leave or other work-related benefits.

• Does workers compensation cover sole traders?

  No, workers compensation generally does not cover sole traders. That’s because a sole trader is self-employed and, as such, isn’t classified as an employee.

• Who is eligible for workers compensation in Australia?

  Generally, to be eligible for worker’ compensation, a person must be:

  • Classified as an employee, not a contractor or self-employed
  • Suffer an injury or illness that occurred while working
  • Have the injury or illness directly related to their employment (not their own negligence, for example).