Public Liability Insurance for Sole Traders: What You Need

Short answer: Public liability insurance covers you if someone is injured or killed, or their property is damaged, because of your negligence. For most sole traders it isn’t required by a general law, but some occupations need it in some states and territories, and most builders, councils and commercial clients won’t let you on site without it. The covers that are compulsory are narrower: workers compensation once you employ someone, third-party personal injury cover on vehicles, residential building cover above each state’s threshold, and professional indemnity in some professions. Workers compensation doesn’t cover you as a sole trader, so protecting your own income is up to you.

This guide draws on business.gov.au’s types of business insurance and the ATO’s deduction rules, and applies in the 2025–26 and 2026–27 income years. It names no insurers and quotes no prices. As a sole trader you have unlimited liability, so a claim you can’t pay can reach your savings, your car and your share of your home. That’s the real reason this cover matters. The state rules for building trades are in our pages for New South Wales, Victoria, Queensland and Western Australia.

What does public liability insurance cover for a sole trader?

It pays claims from other people, not your own losses. business.gov.au describes it as cover if someone dies, is injured or has their property damaged because of your negligence. That can include emotional distress or a recognised psychiatric illness, property damage such as a fire you cause, and consequential loss.

A few examples of what usually falls on each side of the line:

What happens	Usually public liability?
A customer trips over your extension lead and breaks an ankle	Yes: injury to someone else
Your angle grinder sparks a fire in a client’s garage	Yes: damage to someone else’s property
Your ladder and power tools are stolen from the ute	No: your own property, a tools or equipment policy
You hurt your back and can’t work for six weeks	No: your own injury, an accident and sickness or income protection policy
A client says your design advice cost them money	No: professional indemnity

Read the policy’s exclusions as closely as the cover. If your work involves heights, hot works or anything else risky, ask the insurer in writing whether it’s covered before you buy.

Is public liability insurance compulsory for sole traders in Australia?

Not as a general rule. business.gov.au lists public liability among the insurances required by law only for certain occupations in some states and territories. For most sole traders, the requirement comes from contracts instead.

Licensing is where it can become mandatory. In Western Australia, an electrical contractor’s licence needs a current civil liability insurance policy, and the licence is automatically suspended for any period the policy isn’t held. In New South Wales and Queensland, public liability isn’t a general condition of a building contractor’s licence. Victoria leaves it to your registration class, so check with your regulator before you assume it’s optional.

In practice, head contractors, owners’ corporations, councils and most commercial clients ask for a certificate of currency before you start. A contract can also set the minimum amount of cover you must hold. Keep a current certificate on your phone, and when you sign a contractor agreement, check that its insurance clause matches the policy you actually hold.

Which insurance is compulsory by law?

business.gov.au names three insurances most commonly required by law: public liability for certain occupations, workers compensation if you have employees, and third-party personal injury insurance if your business uses motor vehicles, often paid as part of your registration. Add professional indemnity, which is mandatory for some professions, and residential building cover, which each state sets for itself.

For building and trade work, the four largest states differ more than most people expect:

State	Residential building cover	Workers compensation	Public liability
NSW	Home building compensation cover on each project over $20,000 incl. GST, before work starts or any payment is taken	Required once you employ	Not a condition of a contractor licence
VIC	Home Warranty insurance on domestic building work over $20,000 (from 1 July 2026)	Required above $7,500 of remuneration a year, or with an apprentice	Depends on your registration class
QLD	QBCC home warranty insurance on residential work over $3,300	Required from your first worker, within 5 business days	Not in QBCC’s licence eligibility list; some classes need PI
WA	Home indemnity insurance on residential work over $20,000, before taking payment or starting	Required once you employ	Required for electrical contractor licences

The state pages explain when each cover must be in place. In NSW, taking a deposit before it is counts as a breach.

Which other insurances do sole traders and tradies usually need?

That depends on what could go wrong in your trade and what you’d struggle to pay for yourself. These are the main types business.gov.au describes:

Insurance	What it covers	Who usually needs it
Public liability	Injury, death or property damage to others caused by your negligence	Anyone working at clients’ premises or with the public
Professional indemnity	Claims that your advice or services caused a client a loss through a mistake, neglect or breach of contract	Consultants, designers, bookkeepers and other advice-based businesses
Product liability	Injury, death or damage caused by goods you make, sell or supply, including as part of a repair or service	Trades that supply and install products, and anyone selling goods
Equipment, tools and vehicles	Loss of, or damage to, your own gear	Tradies whose tools would cost thousands to replace
Business interruption	Lost income after an insured event stops the business	Businesses with premises or stock
Accident and sickness, income protection	Part of your income while you can’t work through illness or injury	Every sole trader without sick pay

If you supply and fit a tap, a downlight or a hot water unit, you’re supplying goods, so ask about product liability.

Does workers compensation cover a sole trader?

No. business.gov.au is direct about it: if you’re a sole trader, workers compensation doesn’t cover you, so you need your own personal death, illness and disability insurance. Accident and sickness insurance from a private insurer can pay you for lost income while you recover.

The state schemes deal with this differently:

• Queensland lets self-employed people buy a voluntary WorkCover policy for themselves, but only if they arrange it deliberately.
• Western Australia gives sole traders and partners no route into the scheme for their own work.
• New South Wales doesn’t treat you as a worker of your own business, so a workers insurance policy won’t respond to your own injury.

Workers compensation doesn’t usually cover contractors either, though some states can treat a lone subcontractor as the hirer’s worker. If you hire subbies, or work as one, check with your state’s regulator.

Is business insurance tax deductible for a sole trader?

Business insurance usually is. Personal cover depends on what the policy pays for.

• Public liability, professional indemnity, tools and other business policies are business operating expenses. The ATO lists public risk insurance among deductible operating expenses, and they go in your business schedule.
• Income protection premiums are deductible to the extent the policy replaces lost income. The part of a premium that pays for physical injury isn’t deductible. You can’t claim cover held through your super fund when the premiums are taken from your contributions.
• Life, trauma and critical care insurance premiums aren’t deductible.

The flip side is that income protection payments that replace your income are taxable, whether paid regularly or as a lump sum. Keep every premium invoice with your other records for five years. Expenses and receipts for sole traders covers what to keep. If you hold cover through super, sole trader super explains how contributions work.

How much does public liability insurance cost for a sole trader?

There’s no standard price. The premium depends on your trade and how risky its work is, your turnover, the amount of cover you choose, the excess, and your claims history. A roofer and a bookkeeper won’t pay the same for the same cover.

Work out the cover you need before you compare quotes:

1. Check your contracts and licence for a minimum amount of cover. That’s your floor.
2. List the work you actually do, including heights, hot works, underground services or work for strata and councils, and confirm each is covered.
3. Decide whether you need product liability with it, if you supply goods.
4. Compare exclusions, not just premiums. The cheapest policy that excludes your main job is worthless.

…and where does Keel fit?

Insurance premiums are a business cost like any other, and they belong with your records. Keel: Invoice Maker & Receipts, by Ilura Technology OÜ, is an iPhone app for people who work for themselves. You can record a premium as an expense with its receipt, in the same place as your jobs, quotes, invoices and business mileage, so it’s in front of you at tax time. An accepted estimate becomes the invoice in one tap. A “who owes you” list drafts reminders that you review and send yourself; nothing is sent automatically. Records stay on your iPhone, with no account, no bank connection and no cloud sync, and the App Store privacy label reads “Data Not Collected”.

Keel doesn’t sell, compare or check insurance, and it doesn’t lodge returns or connect to the ATO. It’s free with no invoice limit, and free invoices carry a small “Made with Keel” footer. Keel Lifetime is a one-time purchase ($249.99 USD; the App Store shows your local price) that adds custom branding, a signature, premium templates and accountant-ready exports. Keel on the App Store. More Australian guides are in the Australia hub.

Frequently asked questions

Do sole traders need public liability insurance? Not under a general law, but some occupations need it in some states and territories, such as electrical contractors in WA. Most head contractors, councils and commercial clients also require a certificate of currency before you start work. Because a sole trader has unlimited liability, most trades working on other people’s property treat it as essential.

How much public liability cover does a sole trader need? No single legal minimum applies to every sole trader. Where a licence or contract sets an amount, that’s your minimum, so check both before you buy. Beyond that, choose cover that reflects the worst damage your work could realistically cause.

Does workers comp cover me as a sole trader? No. Workers compensation covers your employees, not you. Queensland lets self-employed people buy a voluntary WorkCover policy; elsewhere you’d usually rely on private accident and sickness or income protection insurance. You need workers compensation for anyone you employ, under your state’s rules.

Do I need professional indemnity insurance as a sole trader? If you sell advice or professional services, it’s worth considering, and it’s mandatory for some professions. It covers claims that a mistake, neglect or breach of contract in your work caused a client a loss. Some Queensland licence classes also require it. Check with your professional body or licensing regulator.

Is public liability insurance tax deductible? Yes. Public liability is a business operating expense, deductible in your business schedule like professional indemnity and tools cover. Income protection premiums are deductible to the extent they replace income. Life, trauma and critical care premiums aren’t.

Do tradies need tool insurance? It isn’t compulsory, and public liability doesn’t cover your own tools. It’s worth pricing if replacing your kit would hurt, especially if it sits in the ute overnight. Keep your tool receipts for any claim and for your deductions.

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This article is general information, not insurance, legal or tax advice. Consult a licensed insurance adviser or a qualified Australian professional.