Who Needs NSW HBC Cover Above $20,000: Principal Contractor or Plumber?

In NSW, a plumber is generally the principal contractor—and must take out home building compensation (HBC) insurance—when the plumber contracts with the homeowner, developer or owner-builder for residential building work priced over $20,000 including GST. A plumber who is only an employee or subcontractor for a licensed contractor carrying the insurance obligation generally does not need separate cover, and their policy cannot satisfy the principal contractor’s obligation. The State Insurance Regulatory Authority (SIRA) guidance on residential building compensation insurance obligations, dated 9 July 2026, states these requirements; figures checked 1 October 2026.

Who is the principal contractor for a plumbing job?

For the usual plumbing arrangement, identify the legal party that contracted with the homeowner, developer or owner-builder. SIRA says a person is generally a principal contractor if they contract with:

• a homeowner;
• a developer;
• an owner-builder permit holder, for residential building work covered by the permit; or
• a licensed contractor doing residential building work on land they own, otherwise than under an owner-builder permit.

A homeowner, developer or owner-builder does not take out insurance under the HBC scheme. The principal contractor does. Only a principal contractor can satisfy the insurance obligations under the Home Building Act 1989.

The distinction therefore turns on the contracting structure, not simply on who physically performs the plumbing.

How is the $20,000 including GST amount calculated?

The amount depends on the work and contracting structure:

Residential building work can include trade or specialist work involved in constructing, altering or renovating a dwelling.

The threshold does not apply as a blanket test to every project. SIRA says certain project types are automatically exempt, including construction of some multi-storey buildings.

When must the principal contractor have insurance in place?

The principal contractor must take out insurance before:

• requesting or accepting any money, including a deposit; or
• doing any residential building work under the contract.

The insurance must also be taken out in the same name used to contract the work. If the work is contracted in a corporation’s name, the insurance must be taken out in that corporation’s name.

A practical sequence is:

1. Identify the principal contractor and the exact name used in the contract.
2. Check whether the work is residential building work covered by the scheme.
3. Calculate the relevant price, including GST, and aggregate all contracts for the project.
4. Check whether an automatic exemption applies.
5. Take out the required insurance before requesting or accepting payment or starting work.

Why do employees and subcontractors not carry the same obligation?

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.

For example, SIRA says an employee employed by a licensed contractor and a subcontractor working for a licensed contractor generally do not need their own HBC insurance.

That exemption does not transfer the principal contractor’s responsibility. A principal contractor cannot satisfy its insurance obligations by asking employees, subcontractors or other people performing the work to take out insurance. Insurance taken out by an employee or subcontractor does not cover the principal contractor.

SIRA’s worked example has a licensed builder contract with a homeowner to build a house, then subcontract work to businesses or individuals holding relevant licences, including plumbers. The builder remains the principal contractor and is responsible for insuring the whole project. None of those subcontractors needs insurance for their work in that example, regardless of the value of their individual contracts.

What should a principal contractor check before arranging cover?

SIRA says insurance may be bought from insurers or providers licensed by the State Insurance Regulatory Authority. The principal contractor should also:

• check the SIRA list of approved licence holders;
• confirm the insurer or provider is authorised to supply the required insurance;
• ensure the policy is issued in the contracting entity’s exact name; and
• retain evidence that cover was in place before requesting payment or beginning work.

A homeowner or purchaser considering a new or renovated home can use SIRA’s public register to check whether the principal contractor has taken out insurance. SIRA warns that uninsured work may leave the homeowner unable to claim under the scheme.

What can happen if the principal contractor does not insure?

SIRA says failure to insure may expose a principal contractor to maximum penalties of $110,000 for a corporation and $22,000 in any other case. A conviction for a second or subsequent offence may carry a penalty of up to $55,000, imprisonment for a term not exceeding 12 months, or both.

The consequences may also extend beyond the penalty. Failure to insure may affect:

• the ability to enforce the contract or recover money from the customer;
• whether the project meets some requirements under planning laws;
• project commencement or certification; and
• a current or future homeowner’s ability to claim under the insurance scheme.

This is general information, not financial or legal advice. Check SIRA’s current regulator guidance and the relevant policy’s PDS for the work and contracting entity involved.

Sources

• Insurance obligations for residential building works — SIRA

FAQ

Is a plumber with a direct contract over $20,000 a principal contractor?

Generally, yes. If the plumbing contract is directly with a homeowner, developer or owner-builder permit holder, concerns residential building work and the relevant amount is over $20,000 including GST, the plumber is generally the principal contractor and must take out HBC insurance.

Does a plumber subcontractor need their own NSW HBC insurance?

A subcontractor working for a licensed contractor that must carry the insurance generally does not need separate insurance under the scheme. Their own policy cannot satisfy the principal contractor’s obligation.

Can separate contracts on the same project be assessed separately?

No. If a project is completed under more than one contract, SIRA says the amount is the total of all the contracts.

Must the principal contractor insure before taking a deposit?

Yes. Insurance must be taken out before requesting or accepting any money, including a deposit, or doing residential building work under the contract.

Whose name must be used for the insurance?

The insurance must be taken out in the same name used to contract the work, including the corporation’s name when the contract is in that corporation’s name.