The moment you hire your first employee, workers compensation insurance stops being optional almost everywhere in Australia. Each state and territory runs its own scheme, with its own insurer, its own small thresholds and exemptions, and its own penalties if you get caught without cover. Here is what actually applies depending on where you are hiring.
Workers compensation covers the cost of an employee's injury or illness that happens because of their job, medical costs, rehabilitation and lost wages. If you do not have the required cover and an employee is injured, you are generally on the hook for those costs personally, on top of whatever penalty applies for not being insured in the first place. It is not a box you tick once your business gets bigger. For most states, it applies from your very first employee.
NSW (icare): Compulsory once you employ anyone. There is a small-employer exemption if your annual wages are $7,500 or less, you have no apprentices or trainees, and you are not part of a business group. Going without cover can mean fines up to $55,000 and up to six months' imprisonment, plus repayment of any claim costs.
VIC (WorkSafe Victoria): Compulsory for nearly all employers. The exemption threshold is also $7,500 in annual remuneration, with no apprentices. Penalties for going uninsured include repaying any compensation WorkSafe pays out, back-paying the premiums you avoided, and fines up to roughly $218,000 for a business.
QLD (WorkCover Queensland): Compulsory for every employer with workers, with no wages threshold exemption at all. Going without cover can mean WorkCover recovering paid claims plus a 50% penalty, and unpaid premiums plus a further 100% penalty.
WA (WorkCover WA): Compulsory for anyone who meets the legal definition of a worker. Penalties include fines of up to $5,000 per worker, plus repayment of avoided premiums going back up to five years.
SA (ReturnToWorkSA): You must register within 14 days of hiring. There is an exemption if total wages will be under roughly $16,800 for the year, but if an injury happens while you are uninsured, you still have to register and pay the minimum premium regardless.
TAS (WorkSafe Tasmania): A policy is required with no stated wages exemption. Non-compliant employers can be prosecuted, and on conviction may be ordered to pay the avoided premiums plus any court-imposed fine.
ACT (WorkSafe ACT): All employers must hold a policy, with no threshold exemption. Penalties include on-the-spot fines around $7,500, plus liability for up to double the avoided premium going back up to five years.
NT (NT WorkSafe): Required for any worker under a broad definition that can include many contractors. There is no wages exemption. Going uninsured can mean paying the highest applicable premium for the entire uninsured period, covering claim costs which can run into the millions, and fines of up to roughly $179,000 for a company.
Every state uses broadly the same mechanism: your industry classification, which reflects the inherent risk of what your business does, multiplied by your total wages, then adjusted based on your claims history once your business is large enough to have one. A café and a construction company paying the same total wages will not pay the same premium, because the underlying risk is different.
Hiring your first employee and not sure what cover you actually need? Book a free call and we will help you get it sorted before you need it.
Assuming small businesses are automatically exempt. Most states have a low or no wages threshold before cover is compulsory, not a generous small-business carve-out.
Forgetting contractors. Some states, particularly NT, use a broad definition of worker that can capture people you think of as contractors.
Treating it as a one-off task. Premiums are typically reassessed annually against your actual wages and claims history, not set once and forgotten.
Not registering before hiring across states. If you have staff in more than one state, you generally need separate cover in each one.
Workers compensation is compulsory in every Australian state and territory, with only small or no exemption thresholds, and the penalties for going without it are real, sometimes running into hundreds of thousands of dollars, plus the cost of any actual claim. Sort it out before your first pay run, not after.
We help clients get set up correctly when hiring their first employee, with fixed fees agreed upfront. Book your free call here.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before acting.
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