Under NT legislation, a principal contractor is liable for claims by workers of its subcontractors and is entitled to indemnification from those subcontractors, according to NT WorkSafe’s employer insurance guidance, reviewed 5 January 2023. The same source says a breach of the legislation can incur penalties of up to $179,000 for a company, while an employer without insurance is responsible for claim costs that could amount to millions of dollars and may put a sole trader’s personal assets at risk (figures checked 1 October 2026).
Why can a principal contractor be liable for a subcontractor worker’s claim?
NT WorkSafe attributes this exposure directly to NT legislation. The principal’s responsibility is not confined to claims by its own employees: the guidance says a principal contractor is liable for claims by workers of its subcontractors.
The worker’s legal status still matters. NT WorkSafe defines a worker as a natural person who performs work or a service under a contract and meets the employee test for PAYG withholding, even if the employer should be withholding but is not. If ATO guidance determines that the person is an employee, the individual should be covered for workers compensation even if the business thought the person was a contractor.
Calling someone a subcontractor therefore does not, by itself, resolve the insurance question.
Can the principal recover its costs from the subcontractor?
Yes. The same legislation entitles the principal contractor to be indemnified by the subcontractors whose workers may make the claim.
Liability and indemnification should be treated as separate issues. The principal may have a statutory entitlement to indemnification, but the NT WorkSafe bulletin does not explain the recovery process or guarantee that payment will be available. For a particular claim, obtain legal advice rather than assuming the entitlement removes the need to verify insurance or respond to the claim.
What should a principal contractor check?
| Check | Practical action |
|---|---|
| Subcontractor insurance | Confirm that each subcontractor has workers compensation insurance for its workers. Ask for evidence rather than relying on a verbal assurance. |
| Worker classification | Check whether the natural person meets the worker and employee tests. If unsure, seek independent professional advice about tax and other employer obligations. |
| Principal’s own policy | NT WorkSafe advises principal contractors to maintain their own insurance in case of oversight. |
| Policy response | Read the Product Disclosure Statement (PDS). NT WorkSafe does not state that a principal’s policy will respond to every subcontractor-related claim. |
| Insurance advice | Ask an insurance broker or adviser to review the arrangement. Workers compensation insurance can be obtained through a broker, and the NT WorkSafe page refers to a list of NT approved insurers. |
These checks are complementary. Confirming subcontractor cover does not replace the NT WorkSafe advice to maintain the principal’s own policy, while maintaining the principal’s policy does not establish that a particular claim is covered.
What happens when a claim is uninsured?
NT WorkSafe says an employer without workers compensation insurance is responsible for the cost of any claim, which could amount to millions of dollars. That uninsured exposure can threaten the financial viability of the business.
For a sole trader, the regulator’s warning extends to personal assets. This is why a principal should not rely solely on a subcontractor’s assurance of cover or on an untested indemnity arrangement. The applicable policy PDS must be checked before assuming that the principal’s own insurance will meet the claim.
Is the $179,000 company penalty automatic?
No. NT WorkSafe states that a breach of the legislation can incur penalties of up to $179,000 for a company. “Up to” does not mean every breach automatically receives that amount, and the bulletin does not provide a calculation for an individual penalty.
This is general information, not financial or legal advice. Check the current NT WorkSafe regulator page and each relevant policy PDS before relying on a coverage or liability decision.
Sources
- Workers compensation insurance requirements for employers | NT WorkSafe — reviewed 5 January 2023; figures checked 1 October 2026.
FAQ
Can a business avoid workers compensation cover by calling a worker a subcontractor?
No. If the natural person meets the PAYG employee test, NT WorkSafe says the individual should be covered even if the business believed the person was a contractor. Seek independent professional advice if the classification is uncertain.
Can a principal rely on a subcontractor’s indemnity instead of checking insurance?
The principal has a statutory entitlement to indemnification from the subcontractor, but the entitlement does not replace insurance verification. NT WorkSafe advises confirming that the subcontractor has workers compensation insurance for its workers.
Should a principal maintain its own policy if every subcontractor is insured?
NT WorkSafe considers it prudent for principal contractors to maintain their own insurance in case of oversight. Check the policy PDS to determine whether and how a particular claim would be covered.
Is the $179,000 company penalty automatic?
No. NT WorkSafe describes it as a penalty of up to $179,000 for a breach affecting a company, not an amount automatically imposed in every case.
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