When does NSW home building compensation cover apply?

The $20,000 test

SIRA says the requirement applies to a principal contractor doing residential building, trade or specialist construction, alteration or renovation of a dwelling, where the contract price is over $20,000 including GST.

If the price is not known, or there is no contract, the test is whether the reasonable market cost of labour and materials is over $20,000. Where there are multiple contracts for the same project, the amounts are aggregated.

Sources[1]

Before any money or work

Take out the insurance before you ask for or accept any money, including a deposit, and before work starts. Only the principal contractor can meet the obligation, so cover held by an employee or subcontractor does not stand in for yours.

Check that your licence is current and that the entity named on the cover matches the contracting entity.

Give the owner the certificate of insurance before asking for or accepting any payment and before work starts. Confirm the certificate identifies the actual project as well as the correct contracting entity.

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Exemptions

SIRA notes that some projects are automatically exempt, including certain new multi-storey buildings. Do not assume that a renovation, or any other project type, is exempt without checking.

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Pre-start check you can copy

This is our suggested check, not a SIRA form. The aggregation example is our arithmetic: two contracts on the same project of $14,000 and $9,000 total $23,000, which is over $20,000.

Job: [address]
Contract price including GST: $[amount]
Price unknown? Reasonable market cost of labour and materials: $[amount]
Other contracts on the same project: $[amount]
Aggregate: $[amount] | Over $20,000? [yes / no]
Exempt project? [no / name the exemption and where you confirmed it]

Cover:
[ ] Licence current
[ ] Entity on the cover: [name] matches entity on the contract: [name]
[ ] Cover arranged by the principal contractor, not relying on a subcontractor's policy
[ ] Certificate of insurance given to owner before any payment is requested or accepted: [DD/MM/YYYY]
[ ] Cover in place before work starts: [DD/MM/YYYY]

Sources[1]

Common questions

How to get a home building compensation fund?

The principal contractor arranges the insurance itself, because only the principal contractor can meet the obligation. Do it before asking for or accepting any money or starting work, and check the cover names the same entity as your contract.[1]