Professional Indemnity Insurance is a thorn in advisers’ side, and with uncertainty around the TASA regime, the FPA is concerned that it will turn into an expensive one.
Credit licensing experienced similar regulatory uncertainty. It was unclear whether existing PI thresholds for AFSL activities also covered credit assistance, so separate PI coverage has become an issue and potential extra costs. The FPA has raised concern that the same thing will happen for tax advice.
“We are concerned that PI insurers may target this newly designated category under TASA as additional requirements, even though the giving of tax advice within the context of financial planning is nothing new and there have been no evidence of systemic examples of market failures related to financial planners giving tax advice,” the association said in a submission
Under AFSL licensing requirements, planners must hold PII, but TASA also requires that they hold PII approved by the TPB. The FPA said it was “redundant and inefficient” for the TPB to require additional PII cover, adding to the cost of operating an advice business.
The FPA questioned the lack of consultation with PII providers and whether any changes in policy wording, conditions or coverage, is needed as a result of the new regime.
It recommended that the TPB recognise the existing PII cover held by AFS licensees as sufficient, and that the TPB consult with the Insurance Council of Australia (ICA) about how the existing PII cover arrangements can be amended to satisfy obligations under both the Corporations Act and the Tax Agent Services Act.