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FAQs - National framework of liability capping schemes

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These questions and answers regarding the Institute’s Limitation of Liability Scheme/s are a general guide only. They are not intended as professional advice, and you should rely on your own inquiries and assessment and other suitably qualified and specific professional advice. 
 
The Institute expressly disclaims all liability for any loss or damage arising from reliance upon any information in these questions and answers. 
 
What liability will be limited?

  1. What liability will be limited?
    2.  
  2. Will my liability be limited in relation to a claim under the Trade Practices Act 1974 (Cth)
    3.  
  3. What is meant by “acting in the performance of his or her occupation”
    4.  
  4. What is the Institute’s definition of ‘public accountancy services’?
    5.  
  5. I am a director of a company related to a practice entity. All the directors of the related entity are CPP holders. This related entity provides services which do not fall within the definition of “public accountancy services”. Do I have the benefit of the cap on liability for these services?
    6.  
  6. Will I get the benefit of the cap for all claims made after the commencement of the scheme?
    7.  
  7. A claim was made against me where the scheme operated to limit my liability. Will the scheme be available to limit my liability in relation to other unrelated claims?
    8.  
  8. If a single event results in a number of claims, will the cap apply to the total of these claims?
    9.  
  9. Will I get the benefit of the cap if I provide services in another state/territory?
    10.  
  10. am a member holding a CPP, operating in Malaysia to provide outsourced accounting services for clients in Australia in relation to their Australian businesses. Do I have the benefit of the cap for these services.
Who gets the benefit of the cap
  1. Who is a member of the scheme?
    2.  
  2. Can I elect to opt out of the scheme or is it mandatory for all CPP holders and affiliates?
    3.  
  3. I am a concessional CPP holder. Why am I a member of the Institute scheme?
    4.  
  4. What is a practice entity member?
    5.  
  5. Who will have the benefit of the cap?
    6.  
  6. Does the scheme cover all partners and employees?
    7.  
  7. Does the scheme apply to my partner who is a member but does not have a Certificate of Public Practice?
    8.  
  8. What if the act or omission is that of my non-member employee?
    9.  
  9. If I provide services through a company or trust will my liability be capped?
    10.  
  10. I provide services through a trust structure. Is there any benefit in relation to the capping scheme to my trust becoming a practice entity member?
    11.  
  11. Within my practice structure I have a service company which employs staff. Is there any benefit in applying for practice entity membership for this company?
    12.  
  12. The scheme excludes financial services licensees. I am an authorised representative of a licensee and hold a Certificate of Public Practice. Do I have the benefit of the cap?
    13.  
  13. If I retire or take a break from practice will I get the cap?
    14.  
  14. What cap will apply if my partner is a member of another scheme.
    15.  
  15. Do I get the benefit of the cap if the partner responsible for the act or omission was not providing public accountancy services?
    16.  
  16. What is the Institute’s definition of ‘public accountancy services’?
    17.  
  17. I am a director of a company related to a practice entity. All the directors of the related entity are CPP holders. This related entity provides services which do not fall within the definition of “public accountancy services”. Do I have the benefit of the cap on liability for these services?
PI Cover
  1. Do I still need PI cover when the schemes have commenced?
    2.  
  2. What level of PI cover do I require to get the benefit of the cap?
    3.  
  3. What is the minimum level of PI cover needed?
    4.  
  4. What level of PI cover do I need if I have a higher engagement fee?
    5.  
  5. What is an ‘engagement fee’?
    6.  
  6. Can I reduce the amount of my PI cover to the minimum level when the scheme commences?
    7.  
  7. Does it matter whether I have costs-inclusive or costs-in-addition cover?
    8.  
  8. Do the Institute’s PI requirements for the Scheme apply to each CPP holder or the firm?
    9.  
  9. The caps have changed from those in the NSW Scheme. Once the new NSW scheme commences, which cap on liability will apply, the cap at the time the act or omission occurred (if prior to the new scheme) or the cap at the time the claim is made.
Disclosure of limited liability
  1. What must I do to disclose the limitation of liability to clients?
    2.  
  2. What is considered to be business stationery?
    3.  
  3. Do I need to have the disclosure on audit opinions, financial statements and compilation reports?
    4.  
  4. Do I need to have the disclosure on every page of my communication with clients?
    5.  
  5. What are the consequences of non-disclosure?
    6.  
  6. Is there a requirement regarding the size and colour of the disclosure statement?
    7.  
  7. Do I need to send a letter to clients explaining the scheme?
 
 
 
 
Glossary 
 
PSL 
Professional Standards legislation operative in each state & territory. 
 
Participating member 
The Institute scheme specifies a participating member as all members holding a Certificate of Public Practice, affiliate members and practice entity members other than financial services licensees. 
 
Occupational liability 
Defined in the legislation as: 
“civil liability arising in tort, contract or otherwise) directly or vicariously from anything done or omitted by a member of an occupational association acting in the performance of his or her occupation.”[emphasis added] 
 
Limitation amount 
Where the cap is calculated using a multiple, as it is for Category 1 and 3 services in the Institute scheme, the limitation amount is the amount of the cap calculated by applying the multiple of 10 to the engagement fee up to the monetary ceiling. 
 
Monetary ceiling 
The monetary ceiling is the maximum cap on liability for each category of services as set out in the Institute scheme. 
 
Engagement fee 
The court will determine what constitutes the engagement fee, or “reasonable charge for the services provided by the person or which the person failed to provide and to which the cause of action relates”. The PSL provides that the court is to have regard to “the amount that a competent person of the same qualifications and experience as the person would be likely to charge in the same circumstances 
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Last updated: 10 March