Workers Compensation Insurance in Australia (2026): State Schemes, Who Must Insure and What It Costs

Workers compensation insurance pays an injured worker's wages, medical bills and rehabilitation costs when they're hurt at work or develop a work-related illness, and it protects the employer from being sued for the full cost. In Australia it isn't one national product. Each state and territory runs its own scheme with its own insurer, rules and rates, and the scheme that applies depends mainly on where your workers are based. This guide is for small business owners hiring their first employee, growing businesses operating across state lines and bookkeepers. It covers who must insure in 2026, how premiums are worked out, the 2026–27 average rates, how contractors are treated, NSW's 2026 reforms and worked examples in Australian dollars.

Quick answer

If you employ anyone in Australia, you almost certainly need workers compensation insurance from your state or territory scheme. NSW and Victoria exempt only employers paying A$7,500 or less in wages a year with no apprentices; Queensland has no threshold. Premiums are wages × an industry rate, adjusted for your claims history.

• NSW: icare · Victoria: WorkSafe Victoria · Queensland: WorkCover Queensland · SA: ReturnToWorkSA

• WA, Tasmania, ACT and NT: policies from approved private insurers

• 2026–27 averages: Vic 1.8%, SA 1.85%, WA 1.931%, Qld A$1.343 per A$100 of wages

• Some contractors count as workers — the test differs by state

• Sole traders with no employees aren't covered and don't need a policy

How workers compensation works in Australia

Workers compensation is a no-fault system. An employee who is injured at work, or whose job significantly contributes to a disease, can claim weekly payments for lost wages, medical and hospital costs, rehabilitation and, in serious cases, lump sums for permanent impairment. The worker doesn't have to prove the employer was negligent. In return, the employer's liability is channelled through a compulsory insurance policy, and the right to sue for common-law damages is limited by thresholds that vary by state.

There are eight state and territory schemes plus Comcare, which covers Commonwealth employees and a small number of large national companies licensed to self-insure. Seacare covers some maritime workers. For almost every small business, the relevant scheme is the one in the state or territory where the worker usually works. If an employee regularly works in more than one state, cross-border rules decide which scheme covers them — usually the state where they're based, or where the employer's business is based if that's unclear.

The schemes fall into two groups. In New South Wales, Victoria, Queensland and South Australia, a government insurer or scheme collects premiums and pays claims; these are described as publicly underwritten. In Western Australia, Tasmania, the ACT and the Northern Territory, the regulator approves private insurers, and you buy a policy from one of them in a competitive market; these are privately underwritten. Either way, the insurance is compulsory and the benefits are set by law.

Who must insure

The basic rule is the same everywhere: if you employ a worker, you insure them. The differences are in the edges.

New South Wales. Employers must hold a policy with icare unless they pay A$7,500 or less in total wages during the financial year, don't employ an apprentice or trainee, and aren't part of a group of related businesses for premium purposes. Payments to contractors who are deemed workers count towards the wages figure. If your wage bill passes the threshold mid-year, you need a policy straight away.

Victoria. WorkSafe Victoria says you generally must register if you or your company employ any workers in Victoria. The exemption covers employers with no apprentices who don't pay, and aren't liable to pay, more than A$7,500 in remuneration in a financial year. A point many small company owners miss: if your company employs you personally, you are a worker of your own company and the company must register.

Queensland. Section 48 of the Workers' Compensation and Rehabilitation Act 2003 requires every employer to insure each worker it employs with WorkCover Queensland. There's no wages threshold, so a business that employs one casual for a few hours a week needs a policy from the first shift.

South Australia. ReturnToWorkSA requires you to apply for work injury insurance within 14 days of employing anyone who meets the definition of a worker, and you can apply before you hire. Businesses based outside South Australia may still need to register if they have workers there.

WA, Tasmania, the ACT and the NT. Employers must take out a policy from an insurer approved in that jurisdiction, covering all their workers. Shopping around is allowed — and worth doing, because insurers price risk differently within the regulator's framework.

Sole traders, company directors and family members

Workers compensation covers workers, not business owners. A sole trader, a partner in a partnership or an individual trustee of a trust who doesn't employ anyone isn't a worker, doesn't need a policy and won't be covered by the scheme if they're injured. If you're in that position, you need to arrange your own income protection or personal accident insurance.

Company structures are where states differ. In Victoria, an owner employed by their own company is a worker of that company, so the company must register and cover them. Queensland's Schedule 2 takes the opposite approach: a person who works under a contract of service with a corporation of which they are a director is generally not a worker. In other states, working directors may or may not be covered depending on how they're paid and whether the insurer allows them to be included. Ask your insurer directly rather than assuming.

Family members you pay wages to — a spouse doing the books, a teenager working weekends — are workers like anyone else, and their wages go into your declaration.

How premiums are calculated

Every scheme starts with the same basic sum:

premium = wages × industry rate, then adjusted for employer size, claims history and discounts.

• Wages (called rateable remuneration in some states) means what you pay your workers in the policy period. Definitions are broad and usually include salary, overtime, bonuses, commissions, allowances and, in most schemes, employer superannuation contributions and some fringe benefits. They also include payments to contractors who are deemed workers. Use your insurer's definition, not your payroll software's gross wages line.
• Industry rate reflects the claims cost of your industry. NSW calls it a WIC (Workers Compensation Industry Classification) rate; Victoria and Queensland also classify by industry; WA publishes recommended premium rates by industry class. You're classified by your predominant business activity, so getting the classification right is the single biggest lever on your premium.
• Experience rating applies once you're large enough: your own claims cost pushes your premium up or down from the industry rate. Small employers usually pay close to the industry rate regardless of claims.
• Discounts and loadings vary: NSW's Safe Employer Reward and early-payment discount, minimum premiums for very small employers, and loadings when you don't declare wages on time.

At the start of each policy year you estimate wages; after it ends you declare actual wages, and the premium is adjusted with a refund or an extra bill. In NSW, icare applies a 30% loading to estimated wages at renewal if your actual wage declarations are outstanding, and you lose eligibility for the Safe Employer Reward.

Average premium rates for 2026–27

1.8%

Victoria

Held for the fourth year

1.85%

South Australia

Held for the fourth year

1.931%

Western Australia

Recommended; up from 1.823%

A$1.343 per A$100 of wages

Queensland

Held for the second year

1.99%

NSW target collection rate

Frozen for 2026–27 and 2027–28

These are scheme-wide averages, not the rate you'll pay. An accounting practice or a software developer typically pays a small fraction of the average; a builder, a road freight operator or an aged-care provider can pay several times it. Each scheme publishes its industry rates for the year — check yours before budgeting.

2026–27 rates and changes by state

Most schemes held their averages steady for 2026–27, but the reasons and the fine print differ.

New South Wales. The NSW Parliament passed major workers compensation reforms in 2026. The first changes started on 27 March 2026, including a premium freeze: the Nominal Insurer's target collection rate stays at the 1.99% filed for 2025–26 through the 2026–27 and 2027–28 premium years, and icare's 2026–27 filing keeps the same WIC rates as 2025–26. That follows three years of average increases capped at 8% a year. The freeze doesn't guarantee your own premium won't change — higher wages, a different business activity or your own claims can still move it. For experience-rated employers whose policies start on or after 30 June 2026, premium capping falls from 30% to 25%, so your rate can't rise more than 25% a year because of your own claims.

The reforms also changed what employers pay and what workers can claim. From policies issued or renewed at 4pm on 30 June 2026, the employer excess on a weekly compensation claim equals the weekly payments for the first week of entitlement and the following week. For primary psychological injuries notified from 1 July 2026, a new eligibility test limits claims to defined traumatic events and defined conduct such as bullying, harassment or excessive work demands, and the whole person impairment threshold for extended benefits and work injury damages rises to 25% WPI, then 27% from 1 July 2027 and 28% from 1 July 2029. A new "reasonable and necessary" test for medical treatment started on 1 October 2026. The reforms also created an offence for underinsuring — for example, by understating wages — and raised penalties for not insuring.

Victoria. The average premium is 1.8% of rateable remuneration for 2026–27 — the fourth year at that level — announced in the state Budget on 19 May 2026.

Queensland. WorkCover Queensland held its target average premium at A$1.343 per A$100 of wages for 2026–27, the second year without an increase, and still the lowest average of any state. From 1 July 2026, the separate long service leave levy for contract cleaning fell from 0.75% to 0.50% of ordinary wages.

South Australia. ReturnToWorkSA's board kept the average premium rate at 1.85% for 2026–27, also the fourth year running.

Western Australia. The average recommended premium rate rose to 1.931% for policies starting from 4pm on 30 June 2026, up from 1.823% in 2025–26, which WorkCover WA attributes to higher claim costs and volumes and projected wage growth. Approved insurers set your actual premium with reference to the recommended rate for your industry class.

Contractors: when they count as your workers

A contractor isn't automatically outside the scheme. Each state has rules that sweep some contractors in, and the tests are different, so a business that hires the same tradie in Brisbane and in Melbourne can get different answers.

• Queensland uses the tax system. Under section 11, a person is a worker if they work under a contract and, for that work, are an employee for PAYG withholding purposes. If you'd have to withhold tax from their payments as an employee, they're your worker. Schedule 2 adds deemed workers — for example, a contractor who personally does work that isn't part of their own regularly carried-on trade or business, and labour-hire and group-training placements — and excludes others.
• Victoria looks at whether the contractor's business depends on yours. WorkSafe explains that a contractor operating through a company or trust whose business depends on another business for its existence may be a deemed worker of that other business; payments to the contractor's company then count as remuneration for the business that engages it.
• New South Wales has a list of deemed workers in the workers compensation legislation, including some labour-only contractors and outworkers, and their payments count towards your wages.

A useful starting point is the same question the ATO asks for PAYG withholding and super: are you paying for the person's labour, or for a result from an independent business? If it's labour, assume they may be a worker for workers compensation and check your state's rules. Our PAYG withholding guide and superannuation guarantee guide cover the tax side of the same question. In several states a principal contractor can be liable for an uninsured subcontractor's workers, which is why head contractors ask for certificates of currency before work starts.

Setting up workers compensation for your first employee

1. 1

   Identify the scheme

   Use the state or territory where the worker will usually be based.

2. 2

   Check whether you're exempt

   Only NSW and Victoria have a A$7,500 small-employer exemption — and not if you employ apprentices.

3. 3

   Choose your industry classification

   Pick the class for your predominant activity; it drives most of your premium.

4. 4

   Estimate wages for the policy year

   Include super and payments to contractors who are deemed workers.

5. 5

   Take out the policy before the first shift

   Apply with icare, WorkSafe's agents, WorkCover Queensland, ReturnToWorkSA or an approved private insurer.

6. 6

   Declare actual wages after the year ends

   The premium is adjusted; late declarations bring loadings.

Worked examples in A$

These examples use 2026–27 scheme averages to show orders of magnitude. Your actual rate depends on your industry classification, so treat these as estimates and check your scheme's published rate for your industry.

1. A Brisbane café. Annual wages of A$400,000 for twelve casual and part-time staff. At Queensland's average of A$1.343 per A$100 of wages, the premium would be about A$5,372. The café's real premium depends on the hospitality rate published in the Queensland Government Gazette for 2026–27.

2. A one-person company in Melbourne. A consultant runs her business through a company that pays her a A$80,000 salary. Because the company employs her, it must register with WorkSafe Victoria. At the 1.8% average, the premium on A$80,000 would be A$1,440; at a typical professional-services rate it will be much lower — but registration is still compulsory.

3. An Adelaide manufacturer. A metal fabrication business with A$2 million in wages. At ReturnToWorkSA's 1.85% average, the premium would be about A$37,000. Metal fabrication is generally classed as higher-risk than average, so check the published rate for the class before budgeting.

4. A Perth landscaping business. Wages of A$600,000. At the 1.931% recommended average the premium would be about A$11,586; insurers price around the recommended rate for the landscaping class.

5. A Sydney start-up under the threshold. A two-founder company pays a part-time student A$6,500 in the financial year and has no apprentices. Total wages are under A$7,500, so no policy is required — until the student's hours rise or a second hire pushes wages over the line, at which point the company needs a policy straight away.

Common mistakes

• Not insuring the first casual. In Queensland, South Australia and the privately underwritten states there's no small-employer exemption. In NSW and Victoria, the exemption disappears the moment you hire an apprentice.
• Leaving out super and contractors. Under-declaring wages leads to a back-premium, and in NSW it can now be an underinsurance offence.
• The wrong industry class. A business classified by a side activity instead of its main one can overpay — or underpay and face an adjustment later.
• Missing the wage declaration. Late or missing declarations bring loadings in NSW and can lead to estimated assessments elsewhere.
• Assuming the owner is covered. Sole traders aren't. Directors may or may not be, depending on the state.
• Ignoring other states. Hiring a remote worker in another state usually means a second policy in that state.

Official links

• icare — Workers Compensation Reform FAQsNSW 2026 reforms, premium freeze, excess
• icare — Understanding your premiumWIC rates, capping, wage declarations
• WorkSafe Victoria — Do I need to register?Victorian exemptions and deemed workers
• Queensland — Workers' Compensation and Rehabilitation Act 2003Who is a worker (s 11, Schedule 2) and duty to insure (s 48)
• ReturnToWorkSA — Register for coverSouth Australian registration
• WorkCover WA — Premium ratesRecommended premium rates by industry

Next steps

Before your first hire, confirm the scheme, your industry class and whether any contractors you use count as workers, then get the policy in place before the first shift. Add the premium to your employment on-costs alongside superannuation and, once you're larger, payroll tax; the hourly rate calculator helps you build those costs into your prices.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Is workers compensation insurance compulsory in Australia?

Yes, for almost every employer. Each state and territory makes it compulsory to insure your workers under its own scheme. New South Wales and Victoria exempt only very small employers — total wages of A$7,500 or less a year with no apprentices or trainees. Queensland requires every employer to insure each worker, with no wages threshold. Not insuring brings fines and makes you liable for the cost of any claim.

Who do I get workers compensation insurance from?

It depends on the state where your workers are based. In NSW you insure through icare or a licensed insurer acting for it; in Victoria through WorkSafe's agents; in Queensland only through WorkCover Queensland; in South Australia through ReturnToWorkSA. In Western Australia, Tasmania, the ACT and the Northern Territory you buy a policy from an approved private insurer.

How much does workers compensation insurance cost?

Your premium is your wages multiplied by your industry's rate, then adjusted for your size and claims history. Scheme averages for 2026–27 are 1.8% in Victoria, 1.85% in South Australia, 1.931% recommended in WA and A$1.343 per A$100 of wages in Queensland. Low-risk office businesses usually pay well under the average; construction, transport and manufacturing pay more.

Do sole traders need workers compensation insurance?

Not for themselves. A sole trader, partner or individual trustee who doesn't employ anyone generally doesn't need a policy, and isn't covered by the scheme — you'd need private income protection or personal accident cover. Once you employ anyone, including casuals, you need a policy. In Victoria, if you trade through a company that pays you a wage, you're a worker of your company and it must register.

Do I need workers compensation for contractors?

Sometimes. Every scheme has rules that treat some contractors as workers. Queensland uses the PAYG withholding test: if you'd have to withhold tax from the payment as an employee, the person is a worker. NSW and Victoria have deemed-worker rules for labour-only and dependent contractors. If a contractor is a worker under your state's law, you must include their pay in your wages and cover them.

What changed in NSW workers compensation in 2026?

NSW reforms passed in 2026 froze the Nominal Insurer's target collection rate at 1.99% for 2026–27 and 2027–28, changed the employer claim excess from 30 June 2026, and tightened eligibility for primary psychological injury claims notified from 1 July 2026, with a 25% WPI threshold for extended benefits. Premium capping also fell from 30% to 25%.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Workers Compensation Reform FAQs — icare (NSW Government) · accessed 9 October 2026
2. 2.Understanding your premium — icare (NSW Government) · accessed 9 October 2026
3. 3.Do I need to register for WorkCover insurance? — WorkSafe Victoria · accessed 9 October 2026
4. 4.Help for injured workers and businesses (19 May 2026) — Premier of Victoria · accessed 9 October 2026
5. 5.WorkCover premium freeze (26 June 2026) — Queensland Government · accessed 9 October 2026
6. 6.Workers' Compensation and Rehabilitation Act 2003 (Qld) — ss 11, 48 and Schedule 2 — Queensland Legislation · accessed 9 October 2026
7. 7.ReturnToWorkSA average premium rate for 2026-27 maintained — ReturnToWorkSA · accessed 9 October 2026
8. 8.Register for cover — ReturnToWorkSA · accessed 9 October 2026
9. 9.2026/27 recommended premium rates — CEO media statement — WorkCover WA · accessed 9 October 2026
10. 10.Comparison of workers' compensation arrangements in Australia and New Zealand (30th edition, 2025) — Chapter 8 scheme funding arrangements — Safe Work Australia · accessed 9 October 2026