A Sydney woman has died after her Islamic head dress got caught in a moving go-kart in the New South Wales town of Port Stephens.

The woman in her 20s was driving the go-kart at Bob's Farm in the town north of Newcastle when her head covering got caught in the axle and wrapped around her neck yesterday.

She suffered serious neck and throat injuries and was flown to Newcastle's John Hunter Hospital, but she died.

The owner of the track says he warned the woman it was not wise to wear the head dress.

He says the track has been operating for 10 years with an unblemished safety record.

Police are preparing a report for the coroner.

A WorkCover inspector conducted preliminary investigations at the site yesterday afternoon.

WorkCover issued prohibition notices on two go-karts. One was not registered and the other had insufficient guarding.

EDITOR'S NOTE (April 9): The ABC was initially told the victim of the accident was wearing a burqa. This story has been corrected to reflect police statements that the woman was wearing a head dress.