Professional indemnity insurance

The Tax Agent Services Act 2009 (TASA) requires applicants for registration to maintain or be able to maintain professional indemnity (PI) insurance that meets our requirements.

If a registered tax agent, BAS agent or tax (financial) adviser (collectively known as tax practitioners) fails to maintain PI insurance that meets our requirements, they will not be meeting an ongoing registration requirement and may be in breach of the Code of Professional Conduct (Code). This can result in termination of registration.

PI insurance provides cover for registered tax practitioners against claims made by their clients who suffer loss due to an act, error or omission in their provision of tax agent, BAS or tax (financial) advice services.

This is a strong consumer protection measure which provides a mechanism to compensate clients of tax practitioners.

 

Staged approach to requirements for tax (financial) advisers

Tax (financial) advisers must maintain PI insurance that meets our requirements within 14 days from being notified that they are registered, and for the period of their registration.

Our PI insurance requirements are generally consistent with the Australian Securities and Investments Commission’s (ASIC’s) requirements for Australian financial services (AFS) licensees. However, there are two key differences:

  1. we require PI insurance coverage to include tax advice. ASIC’s requirements do not extend to tax advice
  2. our PI insurance requirements apply to all representatives who are registered with us (including authorised representatives) and not just AFS licensees.

From 1 July 2014 until 31 December 2016:

  • if a tax (financial) adviser has a current PI insurance policy that does not meet our requirements, the policy can continue during this time. When that policy lapses, they must obtain a policy that meets our requirements
  • any new policies taken out by a tax (financial) adviser must meet our requirements.

From 1 January 2017:

  • all tax (financial) advisers must have PI insurance that meets our requirements.

 

What you need to do


  1. Understand how our PI insurance requirements apply to you
  2. You will need to consider our PI insurance requirements and determine how they apply to you. This will generally depend on whether you charge a fee or receive a reward for the tax agent, BAS or tax (financial) advice services you provide.

    • If you charge a fee or receive a reward you will need to have a PI insurance policy or cover that meets our requirements.

    • If you do not charge a fee or receive a reward (for example, you are an employee or contractor) you will not need to have your own PI insurance policy in order to meet our requirements. However, if you are an employee or contractor, you will be required to provide us with the name of your employer or principal and their registration number.

    Regardless of whether you charge a fee or receive a reward, you have to notify us of how you meet our PI insurance requirements. Refer to point 3 below for information on how to notify us of your PI insurance details.


  1. If you are required to have a PI insurance policy or cover, does it meet our requirements?

    You need to maintain a policy or have cover that meets your needs and our requirements.


    Minimum amount of cover required for tax and BAS agents

    Tier

    Turnover of your business
    (excl. GST)

    Minimum aggregate amount of cover (inclusive of legal and defence costs)

    1

    Up to $75,000

    $250,000

    2

    $75,001 - $500,000

    $500,000

    3

    Over $500,000

    $1,000,000


    Our Summary of minimum professional indemnity insurance requirements for tax and BAS agents covers the other requirements you need to meet.


    Minimum amount of cover required for tax (financial) advisers

    Tier

    Turnover of your business
    (excl. GST)

    Minimum aggregate amount of cover (inclusive of legal and defence costs)

    1

    $2,000,000 or less

    $2,000,000

    2

    Over $2,000,000

    Equal to actual or expected revenue from tax (financial) advice services (up to a maximum of $20,000,000).


    Our Summary of minimum professional indemnity insurance requirements for tax (financial) advisers covers the other requirements you need to meet.


  1. Advise us of your PI insurance details


    Tax and BAS agents

    If you are a newly registered tax or BAS agent, you must advise us of the details of how you meet our requirements within 14 days of receiving notification of your registration. You need to provide us the details of your PI insurance policy or cover, or the details of the registered tax practitioner who holds a PI insurance policy that covers you.

    To advise us of your PI insurance arrangements:

    • visit www.tpb.gov.au/myprofile

    • enter your Username (your registration number) and Password and sign in

    • select PI INSURANCE from the left hand side menu and update your details.

    Additionally, you will be required to demonstrate that you maintain PI insurance that meets our requirements on an annual basis through your annual declaration form or renewal application.


    Tax (financial) advisers

    You must advise us how you meet our PI insurance requirements within 14 days of receiving notification of your registration, unless you have already provided this information in your online application form.

    To advise us of your PI insurance arrangements:

    • visit www.tpb.gov.au/myprofile

    • enter your Username (your registration number) and Password and sign in

    • select PI INSURANCE from the left hand side menu and update your details.

    You must also update your details whenever there is a change in your policy, including every time the policy is renewed.

 

Further information

For more information refer to:


Last modified: 20 June 2016