Professional Standards (Limitation of Liability) Schemes

A second layer of security for your practice in professional indemnity insurance.

In Brief

  • Our Professional Standards (Limitation of Liability) Scheme (Scheme) potentially puts a limit on the maximum amount that can be awarded for a legal claim against you.
  • The Scheme applies in Australia to members with a Certificate of Public Practice (CPP), and practice entity members
  • Not all CPP holders or practice entity members are covered by the Scheme
  • CPP holders have annual mandatory reporting obligations under the Scheme.

Disclaimer

The content on this website is provided for general information purposes and may not take into account detail that could be significant in your particular context. The website and its content is not a substitute for reading and understanding (as applicable) the Chartered Accountants ANZ’s Member Handbook, constitutional documents, legislation, regulations, professional guidelines or other applicable laws, or where necessary, obtaining specific advice regarding a specific issue.

For our full website terms and conditions click here.

How it works

Our liability capping scheme is another layer in your risk management safety net.

It puts a limit (cap) on how much can be awarded for a legal claim against your firm. The cap is affected by the size and nature of your practice.

The scheme covers members who are:

  • CPP holders
  • Employees and partners of CPP holders, provided they are not eligible for membership
  • Affiliates
  • Corporate entities who hold practice entity membership

Limited Australian Financial Services Licence (AFSL) holders and authorised representatives of Limited AFSL holders may be covered by the scheme.

You cannot opt out of the scheme, as a member you are included.

Your obligations

Legislation governing the schemes state any one covered by a scheme must let their clients know about it.

As a member under the scheme, you must include a disclaimer on all documents you give actual and prospective clients, including:

  • all business stationery, but not business cards
  • emails
  • facsimiles
  • webpages

The recommended, and in some states, specified form of the disclaimer that when printed uses a size no less than Times New Roman size 8 font, is:

'Liability limited by a scheme approved under Professional Standards Legislation.’

Failing to display the disclaimer could mean you are liable for the amount of a claim your insurance won’t cover. It is also an offence under the legislation and could result in a fine.

Who’s not covered

As our Scheme documents show, the Scheme applies to CPP holders, except if they are also 

‘   holders of an Australian financial services licence and their authorised representatives and employees, not being limited licensees, as defined in the Corporations Regulations 2001 as amended, their authorised representatives or employees; and…’

‘…practice entity members of CA ANZ other than holders of an Australian financial services licence and their authorised representatives and employees, not being limited licensees, as defined in the Corporations Regulations 2001 as amended, their authorised representatives or employees;   ‘

This means that if you are a CPP or a practice entity member who holds a full AFSL, or is an authorised representative of a full AFSL holder, you and your employees are not covered by the Scheme for any work you do, even in respect of work that does not require a full AFSL.

However, if you are a CPP holder or a practice entity member who holds a “limited” AFSLs or is an authorised representative of a “limited” AFSL, you and your employees are covered by the Scheme. 

The Scheme and Professional Indemnity insurance

The Scheme requires members to have a minimum level of Professional Indemnity (PI) insurance.  

 The type of work you perform, your fees and your billing cycle impacts the minimum PI insurance you need

  Audit  Insolvency    Other
Where highest fee is $100k  $2 million  $2 million  $2 million 
Where highest fee is ≥$100k  but < $300k $5 million  $5 million  $5 million 
Where highest fee is ≥$300k but <$500k  $10 million  $10 million   $10 million  
Where highest fee is ≥$500k but <$1million  $20 million  $20 million  $20 million 
Where highest fee is ≥$1million but <$2.5million  $50 million   $20 million   $20 million 
Where highest fee is ≥$2.5million  $75 million   $20 million   $20 million 
  Audit  Insolvency    Other
Where highest fee is $100k  $2 million  $2 million  $2 million 
Where highest fee is ≥$100k  but < $300k $5 million  $5 million  $5 million 
Where highest fee is ≥$300k but <$500k  $10 million  $10 million   $10 million  
Where highest fee is ≥$500k but <$1million  $20 million  $20 million  $20 million 
Where highest fee is ≥$1million but <$2.5million  $50 million   $20 million   $20 million 
Where highest fee is ≥$2.5million  $75 million   $20 million   $20 million 

For more support working out how much you’ll need, refer to the section on calculating your cover below or refer to our online survey.

  Audit  Insolvency    Other
Where highest fee is $100k  $2 million  $2 million  $2 million 
Where highest fee is ≥$100k  but < $300k $5 million  $5 million  $5 million 
Where highest fee is ≥$300k but <$500k  $10 million  $10 million   $10 million  
Where highest fee is ≥$500k but <$1million  $20 million  $20 million  $20 million 
Where highest fee is ≥$1million but <$2.5million  $50 million   $20 million   $20 million 
Where highest fee is ≥$2.5million  $75 million   $20 million   $20 million 

  Audit  Insolvency    Other
Where highest fee is $100k  $2 million  $2 million  $2 million 
Where highest fee is ≥$100k  but < $300k $5 million  $5 million  $5 million 
Where highest fee is ≥$300k but <$500k  $10 million  $10 million   $10 million  
Where highest fee is ≥$500k but <$1million  $20 million  $20 million  $20 million 
Where highest fee is ≥$1million but <$2.5million  $50 million   $20 million   $20 million 
Where highest fee is ≥$2.5million  $75 million   $20 million   $20 million 

Online PI calculator

Use our online PI insurance calculator to get an idea of how much cover you might need to protect your practice

Go to the calculator

What happens if a client makes a claim?

The first thing to do is let your insurer know. Be guided by their advice.

You also need to let us know about the claim. We need the information because of our reporting obligations to the Professional Standards Council. Information you provide is kept strictly confidential and we only report de-identified data.

Your lawyer is responsible for including the liability cap as part of the defence of a claim. The court considers if certain conditions were met at the time the work was performed in making a decision on the outcome of the claim.

These include:

  1. A scheme was in place, and
  2. you were a member of Chartered Accountants ANZ covered by the scheme(see How it works? above), and
  3. your practice held practice entity membership with Chartered Accountants ANZ, and
  4. whether the work meets the definition in Regulation CR2 of public accountancy work, and
  5. the the client had been informed that a Scheme was in place.

More information

Download the Professional Standards Scheme Guide for Lawyers

Download now

The Professional Standards Council and Professional Standards Authority

The PSC is the formal body that has oversight of all professional standards schemes. The Professional Standards Authority is the formal body who monitors Chartered Accountants ANZ's compliance with our Scheme obligations set out in Professional Standards legislation. These laws impose a duty on Chartered Accountants ANZ to ensure members comply with the Scheme legislation and obligations.

We have drafted our Regulations to safeguard our members and ensure the schemes remain effective.

More information

Further information about the PSC and PSA as well as copies of current and previous Scheme documents are available via the PSC website

Read more

Sharing information with us

Each year, we report to the Professional Standards Council on the outcomes achieved in our member compliance programmes. 

To prepare the report, we need information about your practice and indemnity insurance. That’s why we ask you to complete a Liability Capping Questionnaire each year. 

Completing the questionnaire is mandatory. It can be completed online through an emailed link sent in the month of your policy renewal. 

If there are a number of CPP holders and affiliates in your practice who are covered by one PI policy, only one questionnaire will need to be completed annually.

You will need to nominate a PI contact to be the questionnaire recipient. This ensure you receive only one questionnaire and can comply with reporting obligations.

If you don’t complete the questionnaire, you can face disciplinary action under Regulation CR2.

So that your record in our system is up to date, please let us know when any of the following things change:

  • Your contact details
  • Employer
  • Practice contact details
  • Practice structure
  • PI contact person
  • Your PI insurer
  • The month your renewal is due

Or, if:

  • You open, sell, merge or close your practice
  • You relinquish your CPP
  • Another CPP holder joins your practice

Keeping these details up to date means you will receive and can complete your questionnaire on time.

Update your details

Login to ensure the details we have are updated

Login now

Calculating your cover

  • Insolvency work

    Your cover is affected by your billing cycle and is calculated by financial year.

    Where you provide service over multiple financial years, look at the year that had the highest work in progress or other method you use, based on the engagement agreement, to allocate fees across different financial years.

    Scenario One

    Your fees were $500,000 in one financial year for work performed over three previous financial years. The WIP for each of those years was $150,000, $300,000 and $50,000 respectively.

    The highest fee in any single financial year of these three years is $300,000. Using the table above, the minimum PI cover would be $10 million.

    Scenario Two

    You provided insolvency services but billed the client $450,000 and $500,000 under separate insolvency engagements.

    The first bill covered services provided across two financial years: $150,000 one year and $300,000 for the next. The next bill included services which overlapped the previous billing period. The fees charged were $350,000 (this year overlaps the second year of the previous engagement) and $150,000 the next year.

    In this case the highest fee in a single financial year was $350,000 and the PI cover required would be $10 million.

  • Non-insolvency work

    Your cover is calculated by the highest fee you charge for the whole work or service provided by you. Your billing cycle does not affect how much PI insurance cover you need.

    For example, if you undertake audit work and your highest bill for any one service is less than $100,000, you will need insurance cover of $2 million for any one claim. 

    If a legal claim is made, the most that person could receive is $2 million. The liability capping scheme limits the claim to what your insurer will pay.

    If you charge over $100,000 – even for only one service – and your client makes a legal claim, your insurance cover for that work should be $5 million.

    Because you only hold $2 million, the liability capping scheme may not apply and you will be liable for the full amount.

Online PI calculator

Use our online PI insurance calculator to get an idea of how much cover you might need to protect your practice

Go to the calculator