The Institute has been negotiating certain details of the scheme with the PSC for some time, and more recently with the Commonwealth. The Commonwealth provided the professional accounting bodies with a template setting out the minimum terms it would consider acceptable for a scheme capping accountants' liability.  
 
Schemes must be approved by the Commonwealth in order to provide capping for claims made under the Trade Practices, Corporations and Australian Securities and Investment Commission Acts. This approval will achieve an effective national capping mechanism. 
 
What are the changes? 
To secure PSC and Commonwealth approval for the scheme, the following changes have had to be made. These differ from what the Institute had originally communicated to members:

• The minimum cap for all engagements will need to be raised from $500,000 to $1million. The Institute has proposed a phased increase over three periods. This requirement of a minimum $1 million brings the minimum cap into line with that of the Engineers Australia and NSW Bar Association schemes, the only schemes prescribed by the Commonwealth to date.
• The cap for insolvency engagements will need to be a multiple of ten times the highest fee in any single year of the previous three years. The Commonwealth actuary did not consider that there was sufficient claims data to support a lower multiple for insolvency engagements at this time, as the Institute had proposed. However, by allowing the multiple to be based on the highest fee in a single year, rather than the highest fee for a completed multiple year engagement, a concession has been made to the nature of insolvency engagements.
• Australian Financial Services licensees have been excluded from the scheme to ensure that there will be no conflict between the scheme caps and any compensation arrangements which are yet to be required under s.912B of the Corporations Act.

• The Institute: Limitation of liability schemes: important news
• The Institute: How will members be affected?
• The Institute: What are the timescales for the changes?