Lodgement and preparation
Claims that a return, statement or election was prepared incorrectly.
Tax Agent Professional Indemnity
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Tax Agent Professional Indemnity
Professional indemnity for registered tax agents and BAS agents.
Tax claims are usually measured in penalties and interest rather than the fee. A deduction that does not survive review, a lodgement missed, or a restructure advised without the capital gains consequence can leave a client with an amended assessment and a general interest charge. Professional indemnity generally responds where that outcome is said to follow from your work.
What is it?
Registered tax agents and BAS agents prepare and lodge returns, activity statements, elections and related advice for individuals, businesses, trusts and self-managed super funds, often alongside bookkeeping or a broader accounting practice. Registration is administered by the Tax Practitioners Board, which requires registered agents to maintain professional indemnity insurance meeting its stated minimum levels and to notify the Board of the arrangements they hold.
What does tax agent professional indemnity cover?
Advice and structuring
Exposure from restructures, elections and positions taken on a client's behalf.
Regulator response
Costs of responding to a Board investigation, where the wording provides for it.
What affects the cost?
- Fee income and client mix
- SMSF, trust and structuring work
- Number of returns lodged
- Minimum limit set for your turnover band
- Claims history
Worth raising on the call
- The Tax Practitioners Board sets minimum limits by turnover, so cover has to keep pace with growth.
- Penalties and interest are treated differently from primary tax in most wordings.
- Cover is claims-made, so run-off matters when a practice is sold or closed.
Claims we are commonly asked about
Deductions disallowed on review
A client's rental and work-related deductions are disallowed on ATO review because the substantiation was never obtained or held on file. Amended assessments, shortfall penalties and general interest charge follow, and the client looks to the agent who lodged the return.
Contribution recorded in the wrong year
A superannuation contribution is allocated to the wrong financial year and the client exceeds a contributions cap. The claim is the excess contributions tax and the cost of the remediation work needed to sort it out.
Small business CGT concession missed
A business sale is completed without testing eligibility for the small business capital gains tax concessions. The client claims the difference between the tax paid and what a properly tested position would have produced, along with the fees of the adviser who reviewed it.
Worth confirming in the wording
- Worth confirming how ATO penalties, shortfall amounts and general interest charge are treated, since primary tax the client would always have owed is generally not counted as a loss.
- Worth confirming whether SMSF work and anything approaching financial product advice sits inside the wording or needs separate arrangements under your licensing.
- Worth confirming that your limit still meets the Tax Practitioners Board minimum for your current turnover band rather than the band you were in when the policy was first arranged.
Common questions
Is professional indemnity compulsory for registered tax agents?
The Tax Practitioners Board requires registered tax and BAS agents to maintain professional indemnity insurance meeting its stated minimum levels and to notify the Board of the arrangements held. The minimums are tiered by income and are reviewed from time to time, so confirm the current requirement directly with the Board.
Does it pay my client's tax bill?
Generally not the primary tax. Tax the client would always have been liable for is usually treated as their own obligation rather than a loss caused by you. What is more commonly in issue is the additional penalties, interest and remediation cost said to flow from an error, and how those are handled is set by the policy terms.
Does it cover bookkeeping and BAS work as well?
Usually only if those services are declared. Many practices combine tax agent work with bookkeeping, payroll and BAS lodgement, and each should be listed in the insured business description so there is no argument later about what the policy was rated for.
What does tax agent professional indemnity cost?
It depends on the practice rather than a fixed figure. The usual drivers are fee income and client mix, how much SMSF, trust and structuring work you do, the number of returns lodged, the minimum limit set for your turnover band, and your claims history.
General information only. Cover, limits and exclusions depend on the PDS, TMD, eligibility, underwriting and the policy terms. See professional indemnity insurance for the wider picture.
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