Income protection insurance for tradies: what actually happens if you can't work

Q: Is income protection insurance tax deductible for tradies?

Premiums for income protection held outside superannuation are generally tax deductible for individuals, though the exact treatment depends on the policy and your circumstances. Check with your accountant or financial adviser rather than assuming.

Q: How much income protection cover does a tradie actually need?

Enough to cover essential outgoings — not necessarily full income, since most policies cap cover well below 100% anyway. The honest starting point is working out what a genuinely bad month costs to survive, then sizing cover to that.

By Yamate · Last updated August 2026

An employee off work with an injury still gets paid, at least for a while. A sole trader off the tools gets nothing, from anyone, unless they arranged it themselves beforehand. That gap is easy to not think about right up until the day it matters.

1 · The gap nobody mentions at setup

Going out on your own trades a boss's risk for your own upside, and most of that trade is obvious, you keep more of what you earn and you choose your jobs. The part that's easy to miss is that sick leave, workers compensation as an employee, and an employer's obligation to keep paying you all disappear at the same time. Working on your own ABN generally puts you outside the standard workers compensation system that covers employees.

None of that is a reason not to go out on your own. But it is a reason to actually think about what covers the gap rather than assuming something does.

2 · What income protection actually does

It's simpler than it sounds, a policy pays a percentage of your income on a regular basis if illness or injury stops you working past a waiting period you choose. It's built to replace income during a bad stretch, not to hand over a lump sum.

What varies between policies	Why it matters
Waiting period	How long you're off before payments start — shorter costs more
Benefit period	How long payments can continue — a few years, or to a set age
Percentage covered	Most cap well below 100% of income by design
Inside or outside super	Affects both the premium and the tax treatment

The honest way to size it. Don't start from your income, start from what a genuinely bad month actually costs to survive. Rent or mortgage, essential bills, minimum business overheads. That number is usually smaller than people expect, and it's the number that actually matters.

This is exactly the kind of decision worth an actual conversation rather than a guess, since the right structure depends on your income, your super, and what else you're already covered by. HPartners in Brisbane and Toowoomba works on financial advice and planning including this kind of cover, worth a look if you've never actually sat down and worked out what you're exposed to.

Sort the admin, so the rest is one less thing →

Yamate handles the quoting, invoicing, chasing and job records for solo tradies and small crews, and shows your GST, tax and profit per job as an estimate as you go. It is not tax advice, it does not lodge your BAS, and you still lodge your own returns. Founder plan $19/mo if you sign up before 30 September 2026, $29/mo after; Company plan $79/mo for ten people, $15/mo per person after that. 30-day free trial, everything unlocked, no card needed. No lock-in, cancel anytime. Prices in AUD.

FAQ

What happens to a sole trader's income if they get injured?

Unlike an employee, a sole trader has no employer sick leave and no pay while off the tools unless they've arranged something themselves. Workers compensation generally doesn't cover a sole trader working on their own ABN the way it covers an employee.

What does income protection insurance actually cover?

Typically a percentage of your income, paid regularly, if illness or injury stops you working past a waiting period you choose. It replaces income, not a lump sum.

Is income protection insurance tax deductible for tradies?

Premiums held outside superannuation are generally tax deductible for individuals, though exact treatment depends on the policy and your circumstances. Check with your accountant or financial adviser.

How much income protection cover does a tradie actually need?

Enough to cover essential outgoings, not necessarily full income, since most policies cap well below 100% anyway. Work out what a genuinely bad month costs to survive, then size cover to that.

Going out on your own Turnover isn't profit Tax & setup guide

General information only, not financial or insurance advice. Yamate does not sell or recommend specific policies. Whether income protection suits you, and what structure and cover level, depends on your own circumstances — speak to a licensed financial adviser. This page describes the position as read in August 2026.