Yes. Under Northern Territory legislation, a principal contractor is liable for claims by workers of its subcontractors, although it is entitled to indemnification from those subcontractors, according to NT WorkSafe’s Workers compensation insurance requirements for employers, reviewed 5 January 2023.
The same NT WorkSafe bulletin says a company breaching the legislation—including by operating without required cover—can face a penalty of up to $179,000; this is the maximum company breach penalty, not an automatic charge added to a worker’s claim. That 5 January 2023 source also says the temporary exception for workers normally employed in the home jurisdiction and sent to work in the NT applies when they are there temporarily for no more than six months; figures checked 1 October 2026.
What does principal-contractor liability mean for a builder?
Subcontracting does not necessarily move the claim exposure away from the principal contractor. NT legislation establishes both a liability provision and a right to indemnification:
| Issue | Position under NT legislation | Practical response |
|---|---|---|
| A subcontractor’s worker makes a claim | The principal contractor is liable for the claim | Check the subcontractor’s cover before work starts |
| The principal seeks reimbursement | It is entitled to be indemnified by the subcontractor | Do not treat the indemnity right as proof that recovery is automatic |
| The subcontractor has no cover | The principal may still face the worker’s claim | Verify current insurance and resolve gaps before mobilisation |
| An oversight is discovered | WorkSafe advises principal contractors to maintain their own insurance | Keep the principal’s policy in place as an additional safeguard |
The right to indemnification and the obligation to verify insurance serve different purposes. One concerns recovery from the subcontractor; the other helps prevent the principal from discovering after an incident that the relevant worker was uninsured.
What should I check before a subcontractor starts work?
Check every subcontractor rather than relying on a general assurance that “our insurance covers it”.
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Ask for evidence of current workers compensation insurance. A direct confirmation from the subcontractor is useful, but retain policy evidence or confirmation from its insurer or broker where possible.
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Check that the workers being engaged are within the cover. If it is unclear whether particular employees, labour-hire workers or subcontractors are included, ask the relevant insurer or broker to explain the response.
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Check the NT position. An employer taking workers specifically to work in the NT must use an approved insurer in the NT, subject to the limited temporary-worker exception described below.
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Record the verification. Keep evidence showing when the policy was checked, who supplied it and what period it covers. Repeat the check when a policy renews or the subcontracted workforce changes.
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Resolve gaps before work begins. Unclear declarations, expired cover or uncertainty about the contracting entity should be raised with the subcontractor and the relevant insurer, broker or independent adviser.
NT WorkSafe separately advises principal contractors to maintain their own insurance in case of oversight. That advice supports an additional layer of protection, but it does not remove the need to check each subcontractor.
Does calling someone a subcontractor settle their insurance status?
No. NT WorkSafe says a worker includes a natural person who performs work or a service under a contract and meets the employee test for PAYG withholding under the Taxation Administration Act 1953 (Cth), Schedule 1, Parts 2–5—even if the employer should be withholding but is not.
It also says that if ATO guidance determines a person is an employee, that person should be covered for workers compensation even if the employer considers them a contractor. If the employment status is uncertain, seek independent professional advice about tax and other employer obligations rather than relying only on the contract label.
Can workers temporarily sent to the NT rely on home-jurisdiction insurance?
A limited exception applies, but it is narrower than a blanket exemption for working in the NT.
| Worker situation | NT WorkSafe position |
|---|---|
| Workers are employed specifically to work in the NT | Workers compensation insurance must be arranged with an approved insurer in the NT |
| Workers are normally employed in the employer’s home jurisdiction and sent temporarily to the NT | The exception can apply when the temporary work is no more than six months |
| A temporary worker falls within the exception | The employer should still check with the home jurisdiction that its existing insurance covers the worker |
This exception should not be used to overlook workers hired in the NT or a subcontractor’s continuing insurance obligations.
What financial exposure follows from operating uninsured?
An uninsured employer may face two distinct forms of exposure:
| Exposure | What NT WorkSafe says |
|---|---|
| Workers compensation claim costs | The employer is responsible for the claim, which could amount to millions of dollars |
| Company penalty for breaching the legislation | A company can face a penalty of up to $179,000 |
| Wider financial consequences | Uninsured claims can threaten the viability of the business and, for a sole trader, expose personal assets |
The $179,000 figure is neither an automatic surcharge for each claim nor a cap on the cost of an uninsured worker’s compensation claim. It is the maximum company penalty stated for breaching the legislation, while separate claim costs may still arise.
This article is general information, not financial or legal advice. Check the current NT WorkSafe regulator page and the Product Disclosure Statement for each relevant policy. Ask an insurer, broker or independent adviser if the proposed arrangement or policy wording is unclear.
Sources
FAQ
Does the right to indemnification remove the principal contractor’s liability?
No. NT legislation says the principal contractor is liable for claims by its subcontractors’ workers and is also entitled to indemnification from those subcontractors. The indemnity right should be considered separately from verifying that the workers are insured.
Is the $179,000 penalty added to every uninsured claim?
No. It is the maximum company penalty stated for breaching the legislation. It is not an automatic claim charge or a limit on separate claim costs, which NT WorkSafe says could amount to millions of dollars.
Does the six-month exception cover every worker sent to the NT?
No. It applies to workers normally employed in the employer’s home jurisdiction who are sent temporarily to work in the NT for no more than six months. The employer must also check with the home jurisdiction that its existing insurance covers them.
What should a principal contractor do before subcontractors mobilise?
Verify each subcontractor’s current cover for its workers, resolve any uncertainty before work starts, keep evidence of the checks, and maintain the principal contractor’s own policy. NT WorkSafe also suggests seeking advice from an insurance broker or adviser where needed.