Which business insurance is compulsory in Australia? Workers comp, CTP, PI and contract requirements

Only a few types of business insurance are compulsory by law in Australia. Workers compensation is compulsory for employers in every state and territory, compulsory third party (CTP) cover comes with registering a vehicle, and professional indemnity is required for certain professions such as lawyers, registered tax and BAS agents, financial services licensees and registered health practitioners. Public liability is not required by a general law, but it is very often compulsory in practice, because leases, councils, venues, head contractors and licensing bodies refuse to deal with you without it, commonly at a limit of $10 million or $20 million.

This guide is part of the public liability cost overview. For how the professional indemnity requirement differs from public liability, see public liability versus professional indemnity.

Workers compensation: compulsory for employers

Each state and territory runs its own workers compensation scheme. If you employ workers, you must hold a policy with the scheme's insurer or an approved insurer, and premiums are generally based on your wages and industry rate under the scheme's rules.

Points that often catch small businesses:

• Contractors can be "workers". Each scheme has its own tests, and some contractors, labour hire workers and working directors can be treated as workers for premium purposes. Check with the scheme before assuming contractors are excluded.
• Sole traders without employees are usually not covered by workers compensation for their own injuries. They often buy personal accident and illness insurance instead.
• Public liability does not cover your workers. Policies exclude injury to your own employees because workers compensation is meant to respond.

CTP and vehicles

Compulsory third party cover for injury caused by registered vehicles is built into registration in every state and territory, through different models (for example, a choice of licensed CTP insurers in NSW and Queensland, a government scheme in Victoria through the TAC). Public liability policies usually exclude injury and damage caused by registered vehicles, so you also need motor insurance for damage to other people's property. If you use mobile plant or unregistered vehicles on sites, ask how your liability policy treats them.

Professions that must hold professional indemnity

Requirements differ by state, and licensing rules change, so check with the licensing body before buying.

When public liability becomes compulsory in practice

Even without a statute, you will usually need public liability to:

• sign a commercial lease, where the lease requires you to insure and note the landlord;
• trade at markets, festivals and council events, or hold a footpath dining permit;
• work on construction sites, for government agencies or for large companies, under head contract requirements;
• hold some trade licences, where the licensing body requires evidence of cover;
• join an industry association that makes cover a membership condition.

Typical requirements ask for a certificate of currency showing the insurer, policy number, period and limit, and sometimes ask for the principal or landlord to be noted on the policy.

Home building and warranty insurance

Builders doing residential work above state thresholds generally must arrange home warranty or domestic building insurance for their customers, through schemes that differ by state (for example the Home Building Compensation Fund in NSW, domestic building insurance in Victoria, and the QBCC scheme in Queensland). That cover protects the homeowner and is not a substitute for the builder's own public liability.

A decision checklist

1. Do you employ anyone, including family members, working directors or contractors who might be deemed workers? Arrange workers compensation.
2. Do you use vehicles for work? Check CTP is in place through registration and arrange motor cover.
3. Does your profession or licence require PI? Confirm the minimum limit and terms.
4. What do your lease, contracts, councils and venues require? List each required limit.
5. Do you sell or import goods? Check products liability is included. See product liability for importers.
6. Track all of this with the quote preparation checklist.

Frequently asked questions

Can I be fined for not having public liability?

There is generally no fine simply for not holding it, but you may breach a lease, permit or contract, and you would have to pay any claim yourself. Licensing bodies for some trades can refuse or suspend a licence.

Do I need workers compensation if I only use contractors?

Possibly. Each scheme has rules for when contractors are treated as workers. Check with your state or territory scheme.

Is cyber insurance compulsory?

No. However, businesses covered by the Privacy Act 1988 have obligations under the Notifiable Data Breaches scheme regardless of insurance.

What limit do councils usually ask for?

Councils, venues and event organisers commonly ask for $10 million or $20 million. Check the specific permit or agreement.

Sources

• Safe Work Australia — links to every state and territory workers compensation authority
• icare NSW and SIRA — NSW workers compensation
• WorkSafe Victoria — Victorian workers compensation
• Tax Practitioners Board — PI requirements for tax and BAS agents
• Ahpra — registration standards for health practitioners
• ASIC — licensee compensation arrangements