Two covers protect YOU rather than third parties — your tools (the gear you cannot earn without) and your income (if you are hurt or sick and cannot work). Neither is covered by public liability. Here is how each works, the exclusions that bite, and the tax treatment.
Tools of trade cover
"Portable equipment", "general property" or "tools of trade" cover protects your mobile tools and gear — loss, theft, accidental damage, fire and storm — whether on site, in locked storage, or in a locked vehicle.
The exclusions that bite:
- Theft only after forced or violent entry to a locked vehicle or storage — tools taken from an unlocked ute are not covered.
- Unexplained disappearance (gear that just "goes missing") — excluded.
- General wear and tear — excluded.
Insurers want proof of ownership (receipts, photos) at claim time, so keep them.
Sums insured and excesses: cover is sold in bands (e.g. $10,000 / $20,000 / $30,000) with per-item limits unless a high-value item (laser level, generator, specialty saw) is separately listed. The excess is usually a flat amount per claim, sometimes higher for vehicle theft. Set the sum insured to the current replacement cost of everything you depend on — underinsure and a claim gets cut back (see the average clause in Making an Insurance Claim & AFCA).
Income protection
Income protection pays a monthly benefit if you cannot work due to illness or injury — usually about 60–75% of your pre-tax income. It is the cover that keeps the mortgage paid when you cannot swing a hammer. Public liability and workers' comp will not do this for a sole trader (see Workers Compensation).
- Indemnity basis: modern AU policies pay based on your income at the time of claim (older "agreed value" contracts have largely been phased out). As a sole trader, check how "pre-disability income" is defined — some use net profit or an average over 12–36 months, so lean trading years can shrink the benefit.
- Waiting period: how long you are off before benefits start — commonly 14 or 30 days, up to 2 years. Shorter waiting = higher premium.
- Benefit period: how long it pays — a fixed 2 or 5 years, or to age 65. Longer = higher premium.
- Benefits are TAXABLE as income when paid — so focus on the after-tax benefit, not the headline percentage.
It can be held inside super (premiums from your balance) or outside super (paid personally).
Tax treatment
- Income protection premiums are generally tax-deductible when held personally to protect your assessable income (including the self-employed) — but the benefits are taxable when paid.
- Tools, public liability and other business insurance premiums are generally deductible as business expenses where incurred in earning your income (see Tax Deductions for Tradies). Confirm the specifics with the ATO or your accountant.
Premiums
There is no stable retail pricing for either — premiums depend on your trade, tool value, occupation risk class (trades sit higher), waiting and benefit periods, age and health. Treat any figure as indicative and get personalised quotes. The levers you control: the tool sum insured and per-item listing; and the income-protection waiting period, benefit period and insured percentage.
Common mistakes
- Tools stolen from an unlocked vehicle — not covered.
- Underinsuring tools at old purchase price, not current replacement cost.
- No income protection as a sole trader.
- Forgetting income-protection benefits are taxable.
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