An unlicensed tradesman may perform the job competently and may even provide strong references from past clients. However, this person has chosen not to commit to the study or to pay the costs required to obtain a licence. That choice may signal a work ethic that does not meet professional standards. Ask yourself: Should I entrust large amounts of money to someone who has made that decision?
A licence does not guarantee high-quality work or a project completed on time. However, it does give the homeowner support and protection if something goes wrong.
Licensing and insurance requirements exist to protect consumers. They also show that the contractor has passed the state exam and understands both business obligations and building practices.
When a homeowner hires an unlicensed tradesman, the homeowner effectively becomes the employer, and the tradesman becomes the employee. In practical terms, the homeowner takes on the role of contractor, along with all associated legal and insurance responsibilities. These responsibilities include liability and workers’ compensation issues.
The homeowner will not face fines for hiring an unlicensed tradesman, as no law prohibits the act. However, the homeowner becomes legally responsible for the work performed and for any damage the tradesman causes to their property or to others’ property. More seriously, the homeowner becomes responsible for any injuries suffered by the tradesman, the tradesman’s workers, or even so-called “family members” working on the job.
Steps to take when gathering quotes:
- Contact the tradesman and ask about their level of experience.
- Check trade licensing status in NSW using this link: https://verify.licence.nsw.gov.au/home/Trades
- If the tradesman appears appropriately experienced and properly licensed, organise a time for them to inspect the site.
- When they arrive, immediately ask for their licence number, ABN, and proof of insurance.
- If they cannot provide all three, do not proceed with the quotation. These individuals often lack skills or qualifications and seek quick profit at your expense.
- Clearly explain the full scope of work you want completed. Use the same explanation for every tradesman so you receive comparable quotes.
- Choose a tradesman based on both the quotation and your personal comfort level. You invest hard-earned money into your project, and you should feel confident and safe handing it over.
Remember what you truly risk when you hire an unlicensed tradesman. You might save a few hundred dollars—but the potential consequences make that gamble simply not worth it.
Cash-in-hand Work
Tradesmen can accept cash payments without issue (cash is legal tender) as long as they provide the client with an invoice and declare the payment as income. Put simply, the law requires tradesmen to declare all income to the Australian Taxation Office (ATO), including cash payments. If a tradesman fails to do so and authorities discover the breach, significant penalties can apply. When a tradesman accepts cash-in-hand to increase income without reporting it, he breaks the law. This rule also applies to small jobs performed for friends or family members.
Both tradesmen and consumers must also consider important insurance implications. A clear distinction exists between legitimate cash jobs processed correctly and cash-in-hand work done “off the books.” When work occurs off the books, insurance companies often reject claims and refuse coverage, because the law does not recognise the job as having occurred.
Tradesmen also expose themselves to extortion, as a customer could threaten to report them to the ATO unless the tradesman meets certain demands, whether justified or not.
The safest and most responsible approach for all parties is to conduct business professionally and transparently. Paying tax supports essential public services such as schools and hospitals.
Tradespeople who want to increase their take-home income should focus instead on maximising legitimate business tax deductions, reducing operating costs, and implementing marketing strategies that generate additional work.
Alstonville Tiles & Floorcoverings recommends that you do not engage trades people on a ‘cash-in-hand’ basis, and that you make sure that the trades-person holds current, and appropriate trade licenses and insurance cover, and that you ask for references!