Are Company Directors Covered Under Workers’ Compensation in Australia (2026 Guide)

Company directors in Australia are not automatically covered under workers’ compensation. Coverage depends on whether the director meets the legal definition of a “worker” under the relevant state legislation or formally elects to be covered where permitted.

Each state and territory regulates its own workers’ compensation scheme. There is no single national law. As a result, director eligibility varies depending on business structure, payment method, and location of operation.

Many directors assume they are covered because their company pays workers’ compensation premiums. In many cases, that assumption is incorrect.

When Is a Company Director Covered?

A director may be covered under workers’ compensation if:

• They meet the statutory definition of a “worker” in their state or territory
• They receive PAYG wages
• They have formally elected personal coverage (where the scheme allows this)

Coverage also depends on whether the business operates as a proprietary limited company, partnership, trust, or sole trader structure.

State-by-State Overview

Queensland

In Queensland, WorkCover Queensland administers the scheme under the Workers’ Compensation and Rehabilitation Act 2003 (Qld).

• Directors of proprietary limited companies are not automatically covered.
• Directors must elect to take out personal cover with WorkCover.
• Without election, directors cannot access statutory weekly payments or medical benefits.

Victoria

In Victoria, WorkSafe Victoria administers the scheme under the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic).

• Directors are generally excluded unless they meet the definition of a “worker.”
• Eligibility often depends on whether PAYG wages are paid.
• Coverage is assessed based on the working relationship, not simply title.

New South Wales

In New South Wales, workers’ compensation operates under the Workers Compensation Act 1987 (NSW) and is administered by icare NSW and approved insurers.

• Directors are not automatically considered workers.
• Coverage depends on employment arrangements and remuneration structure.
• Additional or voluntary cover may be arranged in certain cases.

Directors vs Sole Traders vs Trust Structures

Coverage differs depending on business structure.

Company Directors

May elect coverage in some states. Not automatically insured.

Trust Beneficiaries

Generally not covered unless separately insured.

Sole Traders

Not eligible for workers’ compensation cover for themselves. They must arrange alternative insurance.

Small business owners frequently assume they are personally covered because they pay workers’ compensation premiums for employees. This is incorrect in many cases.

What Happens If a Director Is Not Covered?

If a director suffers an injury and has not elected coverage:

• No weekly income payments
• No medical expense coverage under the scheme
• No lump sum compensation under state legislation

This risk is particularly significant for directors performing physical or trade-based work such as electricians, plumbers, or construction operators.

Income Protection Insurance as an Alternative

Income protection insurance provides an alternative safety net where workers’ compensation does not apply.

Income protection can:

• Replace up to 70% of gross income
• Provide 24-hour coverage (not limited to work-related incidents)
• Cover injury or illness occurring outside the workplace
• Offer custom waiting periods and benefit periods
• Provide tax-deductible premiums
• Be structured through superannuation in some cases

Unlike workers’ compensation, income protection is not limited to workplace injuries or travel to and from work.

Why Directors Should Review Their Position in 2026

Workers’ compensation schemes vary between states. Definitions, eligibility tests, and election processes differ.

Directors must:

1. Confirm whether they meet the definition of “worker”
2. Determine whether election for coverage is available
3. Review how they are remunerated (PAYG vs dividends)
4. Assess whether alternative cover such as income protection is required

Failure to review this position may result in no financial protection following injury or illness.

Frequently Asked Questions

Are company directors automatically covered by workers’ compensation?

No. Directors are not automatically covered unless they meet the statutory definition of a worker or elect coverage where permitted.

Does receiving PAYG wages mean a director is covered?

Not automatically. PAYG wages may influence eligibility, but the definition of “worker” under the relevant state legislation determines coverage.

Can a director elect workers’ compensation coverage?

In some states, yes. For example, in Queensland directors can elect personal coverage through WorkCover.

Are sole traders covered by workers’ compensation?

No. Sole traders cannot cover themselves under workers’ compensation and must arrange alternative insurance.

Does workers’ compensation cover injuries outside work?

No. Workers’ compensation generally covers work-related injuries and travel to and from work. It does not provide 24-hour coverage.

What insurance protects directors outside work?

Income protection insurance provides 24-hour cover for injury or illness, whether work-related or not.

Conclusion

Company directors in Australia are not automatically covered under workers’ compensation. Eligibility depends on state legislation, business structure, payment method, and whether personal coverage has been elected.

Workers’ compensation provides limited protection and applies only in specific circumstances. Directors who rely solely on their company’s workers’ compensation policy may have no personal coverage.

A structured review of eligibility and alternative protection, such as income protection insurance, is essential.