NSW Subcontractors and HBC Cover: Why the Principal Contractor Insures the $20,000 Project

Under current NSW guidance, the principal contractor must hold HBC cover of at least $340,000 for an eligible, non-exempt residential project before starting work or taking any money, including a deposit, when the contract price is over $20,000 including GST; if the price is unknown or the work is not under contract, the threshold applies to the reasonable market cost of labour and materials (Service NSW, page updated 9 September 2024; figures checked 1 October 2026). The State Insurance Regulatory Authority (SIRA) says only the principal contractor can satisfy the insurance obligation under the Home Building Act 1989: the principal insures the whole eligible project and cannot substitute insurance taken out by an employee, subcontractor or other person performing the work (guidance updated 9 July 2026).

Who is the principal contractor when subcontractors are involved?

SIRA says a person is generally a principal contractor if they are contracting with:

• a homeowner;
• a developer;
• an owner-builder permit holder, for residential building work covered by the permit; or
• where a licensed contractor is doing residential building work on land they own without an owner-builder permit.

Subcontracting does not transfer the principal’s insurance responsibility to the people carrying out individual trades. In the ordinary contracting chain, the contractor who takes the project from the homeowner remains responsible for arranging HBC cover for the eligible project.

Employees and subcontractors working for a licensed contractor generally do not need separate HBC cover. That exemption does not remove the principal contractor’s obligation.

When does the $20,000 threshold apply?

The published threshold is over $20,000 including GST, rather than a project reaching exactly $20,000.

Service NSW says projects that typically require HBC cover include alterations or renovations of residential buildings of any height, houses, duplexes, triplexes, low-rise residential multi-unit buildings up to 3 storeys high, and associated structures such as backyard swimming pools, spas, garages and outbuildings. A project-specific exemption still needs to be checked.

What must the principal contractor do before work starts?

1. Confirm the project’s insurance position. Check whether the contractor is the principal contractor, whether the relevant amount exceeds $20,000 including GST, and whether an exemption applies. The HBC Assist tool can check whether a job needs HBC cover.

2. Apply through a broker distributor. The applicant needs a contractor licence for building, trade or specialist work, an ABN/ACN, and a certificate of eligibility. Service NSW directs applicants to find an insurance broker distributor from icare HBCF’s list, obtain the certificate of eligibility and submit the application through that distributor.

3. Cover every qualifying job. HBC cover must be taken out for each job that meets the requirements 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.

4. Have cover in place before payment or work. The principal must hold the required cover before requesting or accepting any money, including a deposit, or doing residential building work under the contract. The certificate of insurance must also be provided to the homeowner before a deposit is taken or work starts.

Why can’t a subcontractor’s policy replace the principal’s?

Section 98 of the Home Building Act 1989 exempts employees and subcontractors from taking out insurance under the scheme. A principal contractor still cannot satisfy that obligation by asking an employee, subcontractor or another person performing work to take out insurance.

The distinction is important:

• The employee or subcontractor is generally exempt from separate HBC cover.
• Insurance taken out by that worker does not cover the principal contractor.
• The principal contractor remains responsible for taking out the project insurance.

In practical terms, giving each trade a certificate of insurance does not move the HBC obligation away from the principal.

How do the ordinary employee and subcontracting examples work?

SIRA’s guidance updated 9 July 2026 gives two straightforward examples.

Employee example: A company holding a contractor licence for electrical wiring work contracts with a homeowner for $35,000 including GST to re-wire a duplex and install downlights and fans in both dwellings. The company employs a qualified supervisor certificate holder as its nominated supervisor, and that supervisor performs the work.

The employee does not take out HBC insurance. The company that contracted with the homeowner is the principal contractor and must take out the insurance in the company’s name.

Subcontracting example: A licensed builder contracts with a homeowner to build a house. During construction, the builder subcontracts work to businesses or individuals with the relevant licences, including concreting, electrical, plumbing and gasfitting work.

The licensed builder is the principal contractor and is responsible for insuring the whole project. None of those subcontractors needs to take out HBC insurance for their work, regardless of the value of their individual contracts.

The deciding point in both examples is the principal-contractor role, not simply whether an employee or subcontractor performs part of the job.

What can go wrong if the principal contractor does not insure?

SIRA’s guidance warns that failing to insure may have several consequences:

• A corporation may face a maximum penalty of $110,000; in any other case, the maximum is $22,000.
• 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 failure may affect the contractor’s ability to enforce the contract or recover money from the customer.
• It may affect whether the project meets some planning-law requirements and may affect project commencement or certification.
• A current or future homeowner may be unable to claim under the scheme where the contractor cannot complete the project or honour statutory warranty obligations because of insolvency, death, disappearance or a relevant licence suspension.

For a homeowner or purchaser, uninsured work can therefore matter even after the building work has finished.

How can a homeowner or buyer check the cover?

The free public HBC check register lists jobs that have HBC cover. Anyone can use it to confirm that a builder or tradesperson has valid cover for the residential work being carried out in NSW.

A homeowner or purchaser should check the job rather than assuming it was insured. If a developer is involved, the developer also has obligations to ensure buyers receive the principal contractor’s certificate of insurance and information about the scheme.

HBC Assist and HBC check serve different purposes: HBC Assist helps determine whether a job needs cover, while HBC check shows jobs listed as having cover.

This is general information, not financial or legal advice. Check the current SIRA regulator page for the applicable obligation and the relevant policy’s Product Disclosure Statement for its coverage terms.

Sources

• Insurance obligations for residential building works - SIRA
• Apply for home building compensation cover | Service NSW

FAQ

Does a subcontractor whose contract is worth more than $20,000 need its own HBC cover?

Not in the ordinary arrangement where the work is subcontracted from a licensed contractor. SIRA’s subcontracting example says none of the subcontractors needs HBC cover, regardless of the value of their individual contracts. The principal builder remains responsible for insuring the whole project.

Can an employee’s or subcontractor’s insurance cover the principal contractor?

No. SIRA says insurance taken out by an employee or subcontractor does not cover the principal contractor. The principal cannot satisfy its HBC obligation by requiring employees, subcontractors or other people performing the work to take out insurance.

Does a project priced at exactly $20,000 meet the threshold?

The published test is over $20,000 including GST. If the price is unknown or the work is not under contract, SIRA uses the reasonable market cost of the labour and materials to assess the threshold.

When must the principal contractor have HBC cover in place?

Before requesting or accepting any money, including a deposit, or doing residential building work under the contract. Where required, the homeowner must receive the certificate of insurance before a deposit is taken or work starts.

How can a homeowner or buyer confirm that a job has HBC cover?

Use the free public HBC check register. It lists jobs that have HBC cover and allows anyone to check valid cover for residential work being carried out in NSW.