In NSW, the builder or other business that contracts with the homeowner, developer or owner-builder is generally the principal contractor for the residential building work and must take out home building compensation (HBC) insurance when the known contract price is over $20,000 including GST. For a principal contractor, if the price is unknown or the work is not under contract, insurance is required when the reasonable market cost of labour and materials will exceed $20,000 including GST; a project done under more than one contract is assessed using the total of all contracts. Employees and subcontractors generally do not need their own scheme cover, but their insurance cannot satisfy the principal contractor’s obligation, which must be in place before requesting or accepting money—including a deposit—or doing residential building work, according to the State Insurance Regulatory Authority (SIRA) guidance, updated 9 July 2026; figures checked 1 October 2026.
Who is the principal contractor when a builder uses subcontractors?
SIRA generally treats a person as the principal contractor if they contract with:
- a homeowner;
- a developer; or
- an owner-builder permit holder, in relation to residential building work covered by the permit.
The rules also generally include a licensed contractor doing residential building work on land they own, other than under an owner-builder permit.
The key is the contracting relationship, not who physically performs each task. If a licensed builder contracts with a homeowner to build a house and then engages trades such as a concreter, electrician, plumber or gasfitter, the builder remains the principal contractor and is responsible for insuring the whole project.
The homeowner, developer or owner-builder on the other side of the contract does not need to take out insurance under the HBC scheme. That does not transfer the builder’s insurance obligation to them.
When does the $20,000 threshold apply?
For a principal contractor, SIRA’s guidance uses these tests:
| Project arrangement | HBC insurance test |
|---|---|
| Contract has a known price | Insurance is required if the price is over $20,000 including GST. |
| Price is unknown or the work is not under contract | Insurance is required if the reasonable market cost of the labour and materials will exceed $20,000 including GST. |
| Project is covered by more than one contract | The amount is the total of all contracts when applying the threshold. |
| Project is automatically exempt | Certain project types are automatically exempt, including construction of some multi-storey buildings. |
For contracted work, SIRA’s wording is over $20,000 including GST, rather than $20,000 or more.
Do employees and subcontractors need their own cover?
Generally, no. SIRA says employees and subcontractors are exempt from insurance under section 98 of the Home Building Act 1989. Someone carrying out work for a person who must take out HBC insurance does not need to take out separate insurance under the scheme.
Common examples are:
- an employee employed by a licensed contractor; and
- a subcontractor working for a licensed contractor.
However, exemption does not transfer the principal contractor’s responsibility. Only the principal contractor can satisfy the insurance obligation under the Home Building Act 1989. A principal contractor cannot satisfy it by requiring employees, subcontractors or other people performing the work to take out insurance, and insurance held by an employee or subcontractor does not cover the principal contractor.
In SIRA’s builder example, the licensed builder must insure the whole project. None of the subcontractors needs separate HBC insurance for their work, regardless of the value of their contracts.
A worker’s status still depends on the actual contracting relationship. A trade business that contracts directly with a homeowner may be a principal contractor for that work rather than an exempt subcontractor.
When must the principal contractor take out insurance?
Once the project meets the HBC threshold, the principal contractor must take out insurance:
- before requesting or accepting any money, including a deposit;
- before doing any residential building work under the contract; and
- in the same name used to contract the work.
If the work is contracted in a corporation’s name, the insurance must also be taken out in that corporation’s name.
Insurance may be bought from an insurer or provider licensed by the State Insurance Regulatory Authority. SIRA publishes a list of approved licence holders.
How can a buyer or contractor verify the cover?
SIRA provides a public register for checking whether a principal contractor has taken out insurance.
A homeowner or purchaser buying a new or renovated home should check whether the work on the property was insured. If it was not insured, they may be unable to claim under the scheme.
A developer also has obligations to ensure buyers receive the certificate of insurance taken out by the principal contractor and information about the insurance scheme.
This is general information, not financial or legal advice. Check SIRA’s current obligations guidance and public register, and read the relevant policy’s Product Disclosure Statement before acting.
What can happen if the principal contractor does not insure the work?
Under SIRA’s guidance, failure to insure may have financial, contractual and project-related consequences:
- A corporation may face a maximum penalty of $110,000; the maximum in any other case is $22,000.
- A conviction for a second or subsequent offence may carry a penalty of up to $55,000, imprisonment for up to 12 months, or both.
- Failure to insure may affect the ability to enforce the contract or recover money from the customer.
- It may affect requirements under planning laws, including project commencement or certification.
- A current or future homeowner may be unable to claim under the scheme where the work was not insured.
Sources
FAQ
Does a subcontractor need NSW HBC cover if their contract is worth $20,000?
Not merely because of the subcontract’s value. A subcontractor working for a licensed contractor generally does not need separate HBC insurance, and their policy cannot satisfy the principal contractor’s obligation. If the business contracts directly with the homeowner, its role must be assessed under the principal contractor rules.
Is each subcontractor’s price tested separately against $20,000?
No. If a project is done under more than one contract, SIRA says the amount is the total of all contracts when applying the threshold.
What if the project price is unknown?
If there is no contract or the price is unknown, the principal contractor must insure the work when the reasonable market cost of labour and materials will exceed $20,000 including GST.
Can the principal contractor accept a deposit before taking out insurance?
No. Insurance must be taken out before requesting or accepting any money, including a deposit, or doing residential building work under the contract.
How can a buyer check whether the principal contractor has cover?
Use SIRA’s public register to check whether the principal contractor has taken out HBC insurance, then review the relevant policy’s PDS for its terms.
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