AAT reinforces accountants' need for professional indemnity
In a decision with implications for accountants providing advice with respect to self-managed superannuation funds, the Administrative Appeals Tribunal has affirmed a Tax Practitioners Board rejection of a tax agent's request for exemption from the requirement to hold professional indemnity (PI) insurance.
The decision - cited by Institute of Chartered Accountants in Australia specialist Paul Meredith - held that the accountant was required to maintain PI irrespective of his capabilities, the amount of turnover owed to handling tax matters, and his ability to meet any claims from his own resources.
The AAT held that turnover had nothing to do with the issue and that complexity of the claims involved remained the issue.
The AAT also rejected the considerations of the accountant's experience and that he had had no previous claims against him, arguing that the purpose of holding PI was to guard against unforeseen circumstances.
The AAT's decision, while acknowledging the ability of the accountant to meet any claims from his own resources, pointed out that any claims should properly be the responsibility of the PI insurer who was more likely to resolve them expeditiously with a disgruntled client.
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