Why Public Liability Insurance is Essential for Your Business
In the course of running a business, unexpected incidents can occur that lead to financial and legal risks. Whether you operate a small enterprise or a large corporation, public liability insurance is a fundamental safeguard against claims arising from injury or property damage caused by your business activities.
While it’s not legally required in Australia, why risk it? The majority of businesses choose to have it as a precautionary measure against unforeseen events.
What is public liability insurance?
Public liability insurance provides coverage for businesses against claims made by third parties — such as customers, clients, suppliers, or members of the public — who suffer an injury or property damage as a result of the business’s operations. For example:
- A customer slips and falls on a wet floor inside a retail store, resulting in medical expenses and potential legal action.
- A tradesperson accidentally damages a client’s property while carrying out repair work.
- A business participating in a public event is found responsible for an incident that causes harm to attendees.
In each of these scenarios, public liability insurance would help cover compensation costs and legal fees, preventing significant financial strain on the business.
Is public liability insurance legally required in Australia?
Public liability insurance is generally not compulsory by law in Australia. However, there are circumstances where it is required, such as:
- Trade licensing requirements: Electricians, plumbers, and builders often need public liability insurance to obtain and maintain their licences.
- Contractual obligations: Businesses working with government agencies, large corporations, or event venues may be required to hold a certain level of public liability insurance.
- Lease agreements: Many landlords and shopping centre managers mandate a minimum level of coverage for tenants.
Even when not required, having public liability insurance is a responsible business decision that can protect against unforeseen financial losses.
So, no one legally needs public liability insurance, but who should get it?
Public liability insurance is relevant to businesses across various industries, particularly those that interact with the public or operate in environments where accidents could occur. The following businesses and professionals should strongly consider obtaining coverage:
- Businesses with customers or public interactions. If you have customers, suppliers, or visitors to its premises, there is a higher risk of accidents occurring. Retail stores, restaurants, salons, medical clinics, and office spaces with regular foot traffic should have public liability insurance to cover potential claims.
- Businesses operating in public spaces. Companies that work in public areas — such as construction firms, event organisers, and market stall operators — face higher exposure to third-party claims. Public events, in particular, present a risk of injury or damage due to large crowds and various moving parts.
- Tradespeople, contractors & sub-contractors. Tradespeople frequently work on client premises, where there is a risk of property damage or injury. Many trade licences, such as those for electricians and plumbers, require proof of public liability insurance as part of the licensing process.
- Businesses leasing commercial property. Many commercial landlords require tenants to have public liability insurance as part of their lease agreement. Shopping centres, office buildings, and industrial properties often have mandatory minimum coverage levels that tenants must meet before occupying a space.
- Businesses manufacturing or selling products. Product liability insurance is typically used to cover claims related to faulty or dangerous products. It can also provide coverage if a defective product causes injury or damage while being used in a business setting. For example, a café serving food that results in food poisoning could face a claim from affected customers.
What public liability insurance covers.
A comprehensive public liability insurance policy typically covers the following:
- Legal liability for injury or death. If a third party is injured or dies as a result of your business activities, public liability insurance covers compensation costs and related legal expenses.
- Property damage. If your business causes accidental damage to third-party property, the policy will help cover repair or replacement costs.
- Legal costs. If your business is taken to court over a public liability claim, the policy will cover legal defence fees and settlements.
- Compensation payments. If a court or insurer determines that your business is liable, the insurance will cover the compensation you are ordered to pay.
What public liability insurance doesn’t cover.
While public liability insurance is a broad form of coverage, it does not protect businesses from every type of risk. It is important to be aware of its exclusions, which may include:
- Injuries to employees. Employee-related injuries are covered under workers’ compensation insurance, not public liability.
- Defective workmanship. If a job is completed poorly and results in damages, professional indemnity insurance may be required instead.
- Advertising liability. Claims related to false advertising, copyright infringement, or misleading statements typically require a separate form of coverage.
- Vehicle-related accidents. If your business vehicle causes an accident, you will need a commercial motor vehicle insurance policy.
- Intentional acts of harm. Any deliberate harm caused by your business or employees is not covered.
How much public liability insurance does a business need?
The amount of coverage required depends on several factors, including the industry, size of the business, level of risk, and contractual obligations. Standard coverage levels range from $5 million to $20 million, with businesses in high-risk sectors typically requiring higher limits. For example:
- A small café may opt for $5 million coverage to meet lease requirements and customer risks.
- A construction firm working on large projects may require $20 million coverage due to high-risk work environments.
- A business hosting large public events may need $10 million or more in coverage to protect against potential liabilities.
Assessing your business risks and consulting with an insurance advisor can help determine the appropriate coverage amount.
Looking for public liability insurance?
Public liability insurance is a key component of risk management for businesses, providing essential protection against financial and legal risks associated with accidents, injuries, and property damage.
For businesses of all sizes, understanding the level of coverage needed and ensuring compliance with industry standards is essential. Get in touch with us today and take the first step toward a safer, risk aware, protected business.
Need help with your accounting?
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.
EOFY is almost here — are your finances ready? Our guide covers top deductions, super contributions, SMSF essentials and a 30 June checklist to help you maximise your return. Read it here.
Not sure what you can claim as a landlord this EOFY? From loan interest to depreciation, we break down the most common (and overlooked) rental property tax deductions. Read the full guide.
One of the most powerful decisions you can make with your superannuation is whether to run your own self-managed super fund (SMSF) and whether to invest in property through it. Most people know it's possible to use super to buy property. Far fewer know how to do it well. The following seven tips are designed to help you make the right decisions. 1. You Can Borrow Money to Purchase Property in Superannuation. Don't have enough in your SMSF to buy an investment property outright? Since 2008, superannuation held in a self-managed super fund can be used to borrow money for property purchase. This is done through a 'limited recourse loan' using a Bare Trust as the Custodian entity. You can't borrow the total value of the property—typically it's up to 80% for residential properties and 60% for commercial properties, with the required deposit held in the SMSF as security. The SMSF then makes the loan repayments, with rental income received by the fund and property expenses paid by the fund. Importantly, if there is a default on the loan, your other assets in the SMSF are generally protected from standard debt recovery and bankruptcy proceedings. The lender only has recourse to the property itself. Upon completion of the loan repayment, ownership of the property transfers legally to the SMSF. 2. Follow These 8 Steps to Set Up Your SMSF Setting up an SMSF properly can be a complex process. It’s best to set up an SMSF with the assistance of a qualified superannuation advisor, like us! We can assist with both the initial setup and the ongoing management of your fund. There are eight core steps to SMSF set up: Select the appropriate structure and name Sign the trust deed that covers how your SMSF is set up and run (it can have up to four members) Establish a trust for the SMSF by investing assets into the fund Register your SMSF with the ATO Set up a separate bank account for your fund Submit your tax file number (and those of any other trustees) Obtain an electronic service address to receive employer contributions into your fund (if applicable) Roll over funds from your existing superannuation account into your SMSF 3. Keep a Liquidity Buffer If you're buying property through superannuation, make sure you plan to keep a liquidity buffer of cash and/or shares in your fund. Lenders will check for this before lending to you—it should be at least 10% of the value you intend to borrow. But beyond satisfying the bank, it's simply good risk management. Property is an illiquid asset. Having accessible funds in the SMSF means you're not caught short if repairs are needed, the property sits vacant, or an unexpected expense arises. Because superannuation is central to most Australians' retirement security, the government has carefully regulated what can and can't be done with it. They don't want people gambling their retirement away on poor investments or incorrectly using their superannuation fund. 4. Use the Rental Income to Repay Your Loan You cannot live in the property you purchase through your SMSF until after retirement. Most people purchase an investment property and use the rental income generated to repay the loan—which makes excellent financial sense. The key is selecting a property that rents easily and delivers a strong rental return. Your purchasing criteria may look a little different to buying a home you'd live in yourself. For example, proximity to public transport, local amenities, and average rental rates in the area matter more than personal preference. 5. Get It Right and Enjoy Significant Tax Efficiencies One of the most compelling reasons to invest in property through superannuation is the tax efficiency on offer. These benefits can significantly improve the long-term return of a property investment compared to holding it in your own name. Key tax benefits include: No capital gains tax or tax no yearly investment earnings if under super caps. Salary sacrifice advantages if you're sacrificing salary payments into super, loan repayments are effectively tax deductible. Capped tax on investment income—the maximum rate of tax on income after expenses is 15%. Any capital gains on investments held for 12 months or more, is taxed at 10%. Standard investors outside super can pay up to 47%. 6. Follow the Same Due Diligence Rules as Any Property Purchase Buying through superannuation doesn't mean relaxing your standards. If anything, the rules governing SMSFs mean you need to be more rigorous, not less. Property is likely one of the most significant financial decisions of your life. Research, not emotion, should drive your choices. The same rules apply whether you're buying in or out of super: Visit and compare multiple properties Know the values of similar properties in the same area Get all property checks performed by the right professionals Shop around for the right loan structure and lender Don't abandon good investor habits just because the structure is different. 7. Always Get Quality Professional Advice Nothing comes without risk—but the right advice significantly mitigates it. The key is understanding what you're getting yourself into: making informed decisions based on accurate data; keeping a diversified superannuation portfolio that doesn't place all your eggs in one basket; and not underestimating how complex buying property in superannuation can be. Sound Simple? It’s all in the details. If the above tips have made it sound straightforward, know that the detail is where the complexity lives. Getting professional advice from the start helps ensure you make the best possible decisions for your future. When selected according to rigorous property-purchasing criteria, property can be an excellent way to grow your superannuation and increase your chances of building a retirement fund that supports the lifestyle you want. Ready to Explore Property in Your SMSF? Whether you'd like to discuss whether an SMSF is right for you or need help setting one up, reach out to Ascent Accountants . If you want assistance managing the property within your fund, contact the Ascent Property Co team .
June 30 is closer than you think. Learn what tax strategies are still on the table, how to keep more of what you earned this year, and how to get your payroll ready for Payday Super from 1 July 2026.
Is your business structure still working for you? This EOFY, learn how to read the signs of growth, rethink your strategy, and build a real plan from the numbers that actually matter.
