WORKING DIRECTORS AND WORKERS COMPENSATION
| A warning for insurance brokers placing workers compensation insurance for businesses with working directors in Tasmania. |
| Key warning: a workers compensation policy may not respond merely because a working director has been included in payroll records, wages have been declared, and premiums have been paid. The question remains whether the person is, in law, a “worker” under the statutory scheme. |
The recent decision
The recent decision of N Family Trust Trading As Spit N Polish v TQN [2026] TASCAT 87 is a timely reminder for brokers, accountants and business owners dealing with family businesses, companies and trusts where the owner is also actively working in the business.
Many small businesses are structured so that the person performing the work is also a director, shareholder, beneficiary or controller of the entity. In those circumstances, it can be tempting to assume that workers compensation cover follows automatically if the person is paid through payroll, receives superannuation contributions and appears on wage declarations.
The decision demonstrates that those matters may be important, but they are not conclusive.
What was the dispute about?
The worker alleged that he had suffered a neck injury with referred symptoms to his shoulder and arms arising from work. The insurer disputed liability on the basis that the claimant may not have been a “worker” within the meaning of the Workers Rehabilitation and Compensation Act 1988.
At this stage, the Tribunal was not deciding the ultimate entitlement to compensation. The threshold question was whether the employer had established a reasonably arguable case that the claimant was not employed under a contract of service.
The employment records were not the end of the issue
The worker relied on documents and arrangements commonly seen in owner-operated businesses, including payslips, wage payments, superannuation contributions and claimed leave entitlements.
However, the Tribunal considered that there were aspects of the evidence that justified further scrutiny, including the appearance of identical weekly hours and questions about leave and public holiday arrangements.
The result was that weekly payments of compensation and related benefits were not required to be paid to the worker pending a final determination of the dispute.
Why brokers should be concerned
The importance of the decision is not that working directors are excluded from workers compensation. They are not. A director may, in appropriate circumstances, also be an employee of the company.
The risk is that the issue may only be tested after a significant injury has occurred. At that point, the insurer, employer, broker and claimant may all be required to confront a difficult question: was the working director genuinely employed under a contract of service, or did the documents merely create the appearance of employment?
For brokers, the concern is obvious. A client may believe that a policy has been placed to protect the working director, only to discover that statutory entitlement depends on whether the director falls within the definition of “worker”.
Issues brokers should raise at placement and renewal
When arranging workers compensation insurance for a business with working directors, brokers should consider whether the file records clearly identify the legal employer and the legal structure through which the business operates.
Brokers should also consider whether there is evidence of a genuine employment relationship, which may include a written employment agreement, consistent payroll treatment, genuine wage payments, proper superannuation contributions, leave accrual and a clear distinction between wages and trust distributions or profit drawings (if relevant).
These enquiries will assist in practical risk-management that may help identify a potential coverage gaps before any claim occurs.
Practical broker checklist
| Question | Why it matters |
| Who is the legal employer? | A family trust is not itself a legal person; the legal employing entity must be identified. |
| Is the worker also a director, shareholder, beneficiary or controller? | Control of the business may give rise to arguments about whether there is a genuine contract of service. |
| Are wages genuinely paid for work performed? | Payroll entries and wage declarations should reflect the substance of the working arrangement. |
| Are leave and public holiday arrangements consistent with ordinary employment? | Non-accrual; unusual or artificial records may prompt closer scrutiny. |
| Are trust distributions or profit drawings clearly separated from wages? | Mixing these concepts can obscure whether payments are made as employee wages or ownership returns. |
| Has the client been warned about the risk? | Clear file notes may reduce misunderstanding if cover or statutory entitlement is later disputed. |
Conclusion
N Family Trust Trading As Spit N Polish v TQN [2026] TASCAT 87 should prompt brokers to treat working director risks with care. The existence of payslips, superannuation records and wage declarations may assist, but they may not be sufficient if the true legal relationship is open to challenge.
Where an insured has working directors, brokers should consider whether the employment relationship has been properly documented and whether the client understands that workers compensation insurance responds only where the injured person satisfies the statutory definition of a “worker“.
The safest time to identify that issue is at placement or renewal — not after a serious injury has occurred.
Terracall & Associates regularly advises workers, employers and insurers in relation to disputed workers compensation claims, employment status disputes and statutory entitlement issues throughout Tasmania.