NSW Fair Trading Licence Changes 2026: What Builders and Homeowners Must Know

The NSW Fair Trading and Building Legislation Amendment Bill 2026, introduced to Parliament in February 2026, proposes the most significant overhaul of builder licensing in NSW since the Design and Building Practitioners Act 2020. The Bill amends over 22 existing Acts including the Home Building Act 1989, the Strata Schemes Management Act, and the Design and Building Practitioners Act, giving the Building Commission NSW stronger powers to refuse, cancel, suspend, or vary licences, extending disciplinary reach to former licence holders who have exited the industry, and introducing Decennial Liability Insurance (DLI) as a new framework for defect protection in Class 2 apartment buildings.

For builders, developers, and homeowners across NSW, these changes mean tighter qualification requirements, broader regulatory reach, and a new insurance landscape that could fundamentally alter how building disputes are resolved. The Bill remains in Parliament for concurrence, but the direction of travel is clear — regulators are getting stronger tools, and the industry needs to prepare now rather than wait for the legislation to pass.

Why Is NSW Overhauling Builder Licensing Now?

The catalyst for these reforms traces back to the building defect crises at Mascot Towers and Opal Towers, which exposed serious gaps in the regulatory framework governing building professionals. The 2018 Shergold and Weir report revealed systemic inadequacies in compliance and enforcement procedures for the National Construction Code, prompting the 2020 Building Industry Reform that introduced the Design and Building Practitioners Act, the Residential Apartment Buildings Act, and updated the Building and Development Certifiers Act.

Despite those reforms, loopholes remained. Builders and certifiers facing misconduct proceedings could effectively escape regulatory action by surrendering their licences or allowing registrations to lapse. Applicants with invalid qualifications or misrepresented credentials could enter the industry with minimal scrutiny. The Building Commission lacked the surgical tools to address specific authorities within a licence without revoking the entire licence. The 2026 Bill closes these gaps.

With more than 75,000 homes currently under construction in NSW, the stakes are considerable. The Minister for Better Regulation and Fair Trading, Anoulack Chanthivong, framed the reforms as a consumer confidence measure: "Consumers deserve to have the utmost confidence in the professionals handling some of the biggest financial decisions of their lives."

Key Licensing Changes: What Builders Need to Know

The Bill introduces several substantive changes to the licensing framework that directly affect how builders, trades, and certifiers operate in NSW. Each change addresses a specific gap identified through regulatory experience and industry consultation.

Stronger Powers to Refuse and Cancel Licences

NSW Fair Trading and the Building Commission will have clearer authority to refuse licence applications or cancel licences obtained through misrepresentation, error, or invalid qualifications. Previously, the regulator's ability to act was constrained by the need to prove fraud or intentional misrepresentation. The new framework lowers that threshold, allowing action where qualifications simply do not withstand scrutiny — regardless of intent.

For builders, this means the basis for every authority on your licence must be verifiable and current. If you obtained a licence category using qualifications that have since been superseded, or if your referee statements cannot be substantiated, you may face cancellation of that specific authority. We recommend all licensed builders conduct an internal audit of their qualifications and licence categories before the Bill passes.

Surgical Licence Cancellation

Rather than requiring the Building Commission to cancel an entire home building licence when a specific authority is found to be based on an invalid qualification, the Commission will now be able to cancel only the relevant authority — such as joinery or painting — while leaving the remainder of the licence intact. This is a more proportionate response that gives the Commission flexibility to act without causing unnecessary collateral damage to a licensee's broader business.

Extension to Former Licence Holders

One of the most significant changes is the extension of disciplinary powers to cover private certifiers and builders who have surrendered or allowed their registrations to lapse. Under the current framework, a certifier facing misconduct proceedings could effectively escape regulatory action by exiting the industry. The Bill closes that gap. NSW Building Commissioner James Sherrard stated: "Homeowners need to have confidence that certifiers working on their projects cannot provide sub-par services that result in defects and then leave the industry to escape regulatory action."

New Licence Categories Under the Building Bill 2024

Alongside the Amendment Bill, the broader Building Bill 2024 proposes a new licensing scheme with four new variations of building licences, pre-fabrication licences, and the re-classification of waterproofing as a Specialist Trade Work Licence category. All waterproofing work would need to be carried out by a licensed Waterproofer, regardless of the value of the work. The new licensing scheme will come into effect over a period of 2 to 5 years from late 2025 to 2028, allowing impacted businesses time to make adequate arrangements.

Penalties proposed in the Building Bill 2024 are substantial: $330,000 for companies found to be working unlicensed, plus an additional $33,000 per day that unlicensed work continues. For individuals, penalties start at $60,000 plus $6,000 per day.

How Do the Changes Affect Different Stakeholders?

For Licensed Builders and Trades

Every licensed builder in NSW should audit their current licence categories and the qualifications underpinning them. The Bill's expanded powers mean that if any authority on your licence is based on qualifications that do not withstand scrutiny — whether due to changes in training package requirements, expired credentials, or unverifiable referee statements — the Building Commission can now cancel that specific authority without needing to revoke your entire licence. This is both a risk and an opportunity: a risk if your qualifications have gaps, but an opportunity because the Commission's surgical approach means a single invalid authority will no longer threaten your entire business.

Builders who hold the Certificate IV in Building and Construction (CPC40120) or the Diploma of Building and Construction (CPC50220) should verify that their qualifications meet the current training package requirements. Those who obtained licences through recognition of prior learning (RPL) should ensure their RPL assessment was conducted by a registered training organisation and that the assessment evidence is retained.

For Homeowners Commissioning Building Work

For homeowners, the reforms mean stronger consumer protection. The Bill strengthens the Home Building Compensation Fund framework and introduces Decennial Liability Insurance for apartment buildings. If you are building a new home or undertaking a major renovation, you should verify that your builder holds a current contractor licence using the NSW Fair Trading online licence check tool, confirm they have Home Building Compensation insurance for work valued over $20,000, and check that the licence categories match the scope of work they are quoting for.

A builder's licence for general residential work does not automatically cover specialist categories like waterproofing or kitchen, bathroom, and laundry renovation. Under the proposed changes, waterproofing will become a specialist trade work licence category regardless of project value, meaning any builder undertaking waterproofing without the specialist endorsement will be working outside their licence conditions.

For Developers and Apartment Project Principals

The Decennial Liability Insurance framework is the most significant change for developers of Class 2 apartment buildings. DLI is a long-term insurance covering relevant defects in critical building elements — including structure, fire safety systems, and waterproofing — for up to ten years from the date a building is first occupied. Unlike the Home Building Compensation Fund, which only applies to residential buildings up to three storeys and requires the builder to have disappeared, become insolvent, or lost their licence, DLI operates as an insurance of first resort. A building owner can claim as soon as a defect is identified, without first pursuing the builder or developer.

The Ministerial Advisory Panel proposed two models. The preferred option is mandatory DLI, replacing the strata building bond for all new Class 2 buildings after a transition period, with the policy taken out between development approval and the first construction certificate. The alternative is a voluntary model under which the strata building bond would increase from 2% to 5% and extend from two to six years, with developers who secure DLI exempt from both the bond and the Home Building Compensation scheme. The Bill does not mandate DLI yet — it clarifies the required scope of coverage to bring products to market.

Decennial Liability Insurance vs Home Building Compensation: What Is the Difference?

Many builders and developers are confused about how the new DLI framework interacts with the existing Home Building Compensation (HBC) scheme. The table below sets out the key differences.

The broadening of DLI coverage from "serious defect" to "relevant defect" brings it closer to the Home Building Act's "major defect" definition, effectively providing apartment owners with a level of protection that was previously only available to low-rise residential homeowners through HBC. For developers, this means the cost of DLI will need to be factored into project budgets, potentially adding to construction costs at a time when the industry is already under pressure.

What Penalties Apply for Unlicensed Work Under the New Framework?

The proposed penalty regime under the Building Bill 2024 represents a significant increase from current levels. The current maximum penalty for unlicensed contracting under the Home Building Act is $110,000 for an individual. The new framework dramatically escalates these penalties.

For context, a company found to have been working unlicensed for 30 days could face penalties of $330,000 plus $990,000 in daily penalties — a total of $1.32 million. These are not theoretical numbers. NSW Fair Trading actively investigates complaints and runs periodic compliance operations, and the expanded powers under the 2026 Bill will make it easier for the regulator to identify and act on unlicensed work.

How to Prepare: A Practical Checklist for NSW Builders

Based on our experience advising builders and developers across NSW, we recommend the following preparation steps before the Bill passes:

1. Audit your licence categories. Log into the NSW Fair Trading portal and review every authority on your licence. For each category, identify the qualification or pathway used to obtain it. If any qualification is outdated or was obtained through an RPL process where evidence is not retained, contact the relevant registered training organisation to verify.

2. Verify HBC insurance coverage. Ensure your Home Building Compensation insurance is current and covers the correct project value. Under the Home Building Act, failing to obtain mandatory HBC insurance can result in penalties exceeding $22,000 plus immediate licence suspension. All residential building work valued over $20,000 requires HBC insurance.

3. Check waterproofing credentials. If you currently undertake waterproofing work under a general building licence, you will need a specialist trade work licence for waterproofing once the new categories commence. The Certificate III in Construction Waterproofing (CPC31420) is the recognised qualification pathway.

4. Review referee statements. If your licence was obtained based on referee statements verifying two years of industry experience, ensure your referees are still contactable and their statements can be substantiated. The expanded powers to refuse and cancel licences mean invalid referee statements are now a direct risk to your licence.

5. Prepare for DLI if developing Class 2 buildings. Developers of apartment buildings should monitor the DLI framework closely. Even though the Bill does not mandate DLI yet, the legislative architecture is being put in place. Engage with your insurance broker early to understand likely premium structures and coverage requirements.

What Does This Mean for the NSW Construction Industry?

The 2026 licensing reforms arrive at a challenging moment for the NSW construction industry. The Housing Industry Association has warned that government policy failures put the 1.2 million national housing target at risk, with small construction firms spending up to five hours per week handling paperwork instead of building. Sydney land prices have doubled per square metre since 2015, and the Reserve Bank's interest rate trajectory has squeezed borrowers and clouded the outlook for new housing supply.

Against this backdrop, additional regulatory compliance requirements could place further strain on small builders. However, the surgical approach to licence cancellation — allowing the Commission to cancel a specific authority rather than an entire licence — is a meaningful improvement that recognises the proportionality concerns the industry has raised. The Building Commission's consultation with Master Builders NSW and other industry bodies during the reform development process suggests a willingness to balance consumer protection with industry sustainability.

The key question for the industry is whether the Building Commission will have the resources to effectively exercise its expanded powers. As Ciro Figaro, Partner at Strata Title Lawyers, noted: "Whether the department will have the resources to continue to use enforcement powers in the context of appeals and review is yet to be seen." The legislation gives regulators stronger tools, but the effectiveness of those tools depends on adequate funding and staffing.

For giantA's clients, we are already incorporating these regulatory changes into our project planning and advisory services. Whether you are a homeowner planning a renovation, a developer considering a multi-unit project, or a builder preparing for the new licensing regime, understanding these changes early gives you a practical advantage in navigating the evolving NSW building regulatory landscape.

Frequently Asked Questions

When will the NSW Fair Trading licence changes take effect?

The Fair Trading and Building Legislation Amendment Bill 2026 was introduced to Parliament in February 2026 and is currently in concurrence. The new licensing categories under the Building Bill 2024 will come into effect over a period of 2 to 5 years from late 2025 to 2028, with different categories phasing in at different times. Builders should monitor the NSW Parliament bill tracker and Building Commission NSW announcements for specific commencement dates.

Will my current NSW builder licence still be valid?

Yes, existing licences will remain valid during the transition period. However, the Bill gives the Building Commission new powers to cancel specific authorities within a licence if the qualifications are found to be invalid. We recommend auditing your licence categories and qualifications now to ensure they meet current standards. If any authority is based on outdated qualifications, consider upgrading before the new framework takes effect.

What is Decennial Liability Insurance and who needs it?

Decennial Liability Insurance (DLI) is a 10-year insurance policy covering relevant defects in critical building elements — structure, fire safety systems, and waterproofing — for Class 2 apartment buildings. Unlike Home Building Compensation, DLI attaches to the building rather than the builder, meaning it transfers with ownership. The Bill does not mandate DLI yet but establishes the framework for it. Developers of Class 2 buildings should prepare for DLI to become mandatory after a transition period.

How much are the penalties for unlicensed building work in NSW?

Under the proposed Building Bill 2024, penalties for unlicensed work are $60,000 for individuals and $330,000 for companies, plus $6,000 and $33,000 per day respectively that unlicensed work continues. This is a significant increase from the current maximum of $110,000 under the Home Building Act. NSW Fair Trading actively investigates unlicensed contracting through compliance operations and consumer complaints.

Will waterproofing require a separate licence under the new system?

Yes, the Building Bill 2024 proposes reclassifying waterproofing as a Specialist Trade Work Licence category. All waterproofing work must be carried out by a licensed Waterproofer regardless of the value of the work. Builders who currently undertake waterproofing under a general building licence will need to obtain the specialist credential, typically through the Certificate III in Construction Waterproofing (CPC31420).

Can the Building Commission cancel my licence after I have left the industry?

Yes, one of the key changes in the 2026 Bill is the extension of disciplinary powers to former licence holders and certifiers who have surrendered or allowed their registrations to lapse. This closes the loophole where a certifier facing misconduct proceedings could exit the industry to escape regulatory action. The Commission can now impose fines and disqualifications even after a professional has left the industry.

What should homeowners check before hiring a builder in 2026?

Homeowners should verify the builder's licence on the NSW Fair Trading online licence check tool, confirm the licence categories match the scope of work being quoted, check that Home Building Compensation insurance is in place for projects over $20,000, and ensure any waterproofing work is carried out by a specialist licensed waterproofer. Request references from previous clients and check for any disciplinary history on the public register.

How does DLI differ from Home Building Compensation insurance?

DLI covers Class 2 apartment buildings for 10 years and operates as insurance of first resort — owners can claim directly when a defect is identified. HBC covers residential buildings up to 3 storeys for 6 years (major defects) and 2 years (other defects), and only applies when the builder is insolvent, dead, disappeared, or has had their licence suspended. DLI attaches to the building and transfers with ownership; HBC attaches to the builder's contractual relationship.

This article was prepared by Franz Phan, Senior Planning Consultant at giantA Pty Ltd with 15+ years of experience in NSW development approvals, building compliance, and construction advisory. giantA provides architectural services, DA/CDC approval management, and building compliance consulting across Sydney and greater NSW. For project-specific advice on how the 2026 licensing changes affect your development, contact us at giantA.com.au/contact.

Sources: NSW Parliament Bill Details — Fair Trading and Building Legislation Amendment Bill 2026 | NSW Government — Building and Trade Licences | Master Builders NSW — Proposed Licensing Changes | SIRA NSW — Home Building Compensation