Q. What is professional standards legislation (PSL)? A.
PSL is a state legislation implemented to improve the occupational standards of professionals and to protect consumers of their services.
PSL allows the registration of an occupational scheme which has the effect of limiting the liability of the members of the professional association, in regard to economic loss for damages arising from occupational liabilities. It does not limit liability for death, personal injury, fraud or dishonesty and some other form of actions.
In return for capped liability, members of the scheme are required to have in place risk management strategies, compulsory professional indemnity (PI) insurance cover, continuing professional development and be subject to an appropriate complaints and disciplinary mechanism.
PSL is now in place in all Australian states and territories. There are also mutual recognition amendment acts proposed for states and territories to provide automatic recognition of schemes approved in other locations.
Q. Why is CPA Australia supporting the implementation of PSL? A.
CPA Australia believes that the implementation of PSL by the state governments, together with the Federal Government's amendments to the Trade Practices Act (TPA), will benefit members in the long term.
Q. What are the benefits of PSL? A.
CPA Australia believes that the implementation of PSL may lead to the lowering of PI insurance premiums in the long-term and the provision of better services by members.
We also believe that it is also in the public interest as PSL will protect consumers by making insurance and risk management schemes for professionals (who are members of occupational schemes) compulsory.
Members of an occupational scheme have the benefit of capped liability on claims in return for complying with high standards of risk management and disciplinary procedures, as well as required level of PI insurance cover and professional development.
The commencement of Federal Treasury Legislation Amendment (Professional Standards) Act 2004 means that with PSL being passed in the states, it is not inconsistent with TPA. This will prevent 'forum shopping', for example using TPA claims to circumvent state laws, particularly, the deceptive and misleading conduct provisions.
Q. Will PSL have an impact on me (member)? A.
It is compulsory for CPA Australia public practice certificate holders to become members of an occupational scheme.
Members of an occupational scheme have the benefit of capped liability on claims but in return, they are required to have risk management strategies, compulsory PI insurance cover, continuing professional development and be subject to an appropriate complaints and disciplinary mechanism.
To comply with these requirements, there may be increased compliance costs in:
PI insurance cover: under CPA Australia's By Laws, members are required to hold PI insurance cover at a minimum level of $250,000. Under PSL, members are required to raise the minimum levels of cover from $250,000 to $750,000 (or 10 times the fee cost if the fee is > $75,000). Members who hold less than $750,000 in PI insurance cover will be affected. From 1 July 2009 the minimum level of cover will be $1m.
Registration fees: members have to pay $50.00 to be a member of an occupational scheme. This fee is paid to the schemes' government regulator, being the relevant state or territory Professional Standards Council.
Stationery printing costs: members must promote their occupational scheme membership on their stationery and may require new stationery.
Q. What is the limit of our liability under our occupational scheme A.
Safety ceilings (caps) on claims are set high enough to cover most consumer claims and most corporate claims for economic loss.
Schemes are approved by the Professional Standards Council (PSC) in accordance with the legislation, in consultation with the relevant professional association, and with regard to the nature and amount of past claims, and the need to protect consumers.
The PSC also calls for public submissions before approving an occupational scheme. Consumers and other parties are able to object to schemes prior to approval.
Currently, the minimum cap is set at $750,000 for economic loss. This means that the scheme does not limit economic losses below $750,000. Where damages are above $750,000, the scheme limits liability for those damages to, between $750,000 and $20 million, depending on the amount of the fee for the service.
Q. Will the minimum level of PI insurance cover required under PSL be sufficient for me? A.
CPA Australia advises members to conduct a proper risk assessment on the level of PI insurance cover they need, irrespective of the minimum requirement of the scheme.
Members should examine their potential risks in the type of work they perform and the kind of cover required.
Members should look at what they envisaged to be the highest fee for a service provided for a client in any one year.
If it is likely that you will be providing a fee for a service to a client where the fee is greater than $75,000, you should consider increasing your PI insurance cover.
Q. Who does the scheme cover? A.
The accountants' scheme administered by CPA Australia will cover individual members who hold CPA Australia's Public Practice Certificates.
Other classes of members may be added at some time in the future. This scheme also includes services provided by an Authorised Representative but excludes services by members who hold an AFSL.
It was decided that members offering part-time or pro-bono services should not be included in the scheme as they would be required to meet increased compliances which are too onerous for retired members. These members are those who earn less than $7,500 who are not required to hold a public practice certificate.
Q. When will PSL be implemented in all states? A.
All states and territories have proclaimed PSL and have a Professional Standards Council.
CPA Australia lodged applications for its occupational scheme in all mainland states and territories in 2007.
Applications for schemes in Western Australia, South Australia, ACT, Northern Territory, Queensland and Victoria were approved for advertising on 19 October 2007.
Public notification of those schemes' applications were formally published in major daily papers on 31 October 2007.
Schemes were forwarded for gazettal by the relevant state attorney-general in December 2007.
Those schemes became operational in the first half of 2008.
The Tasmania scheme is expected to be in place in coming months.
Q. What do I have to do if PSL is implemented in my state and CPA Australia's occupational scheme is accepted by the PSC? A.
You will be provided with a regular update on the status of the legislation in your state and the progress of our application for the scheme through the CPA Update.
You will also be informed of your compliance requirements in advance so as to give you sufficient time to comply.
