Who benefits from the cap?

Participating members

If the act or omission is that of a member and the requirements of the PSL and scheme are met, then the following participating members get the benefit of the cap:

• Institute CPP holders, affiliate and practice entity members, other than financial services licensees are participating members of the schemes. The schemes apply to all CPP holders including those members who hold a nil rate or concessional CPP.
• Institute CPP holders & affiliate or practice entity members other than AFS licensees who are partners of the participating member
• Non-member partners and employees as long as they are not entitled to membership

Members who hold a financial services license are excluded from the limitation of liability in relation to all services provided, including those which do not require an AFS license. This was a condition of Commonwealth prescription.

The scheme will limit the liability for a member who no longer holds a CPP as long as they were a participating member of the scheme when the service on which the claim was based was provided and have the benefit of adequate PI cover at the time of the claim.

Practice entity membership

PSL in all jurisdictions now applies to incorporated entities. Members providing services through an incorporated entity, or structures which include an incorporated entity, should consider whether that entity would be at risk in the event of a claim.

Practice entity membership was established to provide those incorporated entities access to capping as participating members of the Institute scheme. The benefit of the cap on liability will apply for both the entity and its officers as long as those non-Institute member officers are not entitled to membership.

However, to be eligible for practice entity membership, the incorporated entity must be entitled to use the description 'Chartered Accountants' in accordance with the Institute's Regulation R9/1205.

Institute approval of a form of practice structure prior to 2007 does not constitute approval of practice entity membership.

Learn more about practice entity membership.

What does this mean for me?

Review your practice structure to maximise your access to liability capping by ensuring that:

• Principals of the practice are participating members of the Institute scheme
• No principal of the practice is a non member who would be entitled to membership
• Any incorporated entity which forms part of the practice structure which might be at risk in the event of a claim is a Practice entity member.

 

Article last updated 16 November 2010