2022 - 2026 Professional Standards Scheme
The IPA Professional Standards Scheme (Scheme) is a legal instrument that requires the IPA to monitor, enforce and improve the professional standards of IPA PPC holders. By doing this, IPA PPC holders are permitted to join the IPA Scheme as a Scheme Participant as they provide a high level of consumer protection and professional accounting services.
As a result of the IPA undertaking this commitment, the Scheme caps the civil liability/damages that a Scheme Participant may be required to pay, if a court upholds a claim against them.
The Professional Standards Councils (PSC) oversee the IPA Scheme and the ongoing requirements for the IPA and IPA Scheme Participants. Information about the PSC and the Professional Standards Legislation and can be found on the PSC website here.
The IPA Scheme commenced on 1 January 2022 and will remain in place for five years until the 31 December 2026. A copy of the Scheme Instrument (scheme rule) can be found here. There were significant changes from the 2019 – 2021 IPA Scheme, which may affect some PPC holders. The changes are summarised below.
(1) Two Scheme caps
The Scheme now has two Scheme caps, $2 million and $10 million. Your Scheme cap is determined by your fee income/turnover (excluding GST) for each previous financial year.
PPC holders with fee income (excluding GST) of less than $10 million for the last financial year will retain their existing $2 million Scheme cap and will continue to be required to hold professional indemnity (PI) insurance of at least $2 million per reinstatement, have at least one reinstatement in the policy and meet all the PI insurance requirements in By-law 9.1.11.
PPC holders with fee income (excluding GST) of $10 million or more for the last financial year will have a new Scheme cap of $10 million. The PI insurance requirements will rise to a minimum of $10 million per reinstatement, have at least one reinstatement in the policy and meet all the PI insurance requirements in By-law 9.1.11.
It is imperative all PPC holders hold the correct level of PI insurance as the Scheme cap protection relies on holding the correct PI insurance amount. The IPA in house insurance broker IPA Insure offers cost effective insurance solutions and can be contacted on (03) 8665 3139 or [email protected].
(2) Higher discretionary Scheme cap
The Scheme allows members to vary their Scheme cap amount up from the default $2 million or $10 million cap to a maximum of $75 million. Members who wish to vary their Scheme cap must apply to the IPA and hold PI insurance to the amount of the higher Scheme cap.
Applications to vary a Scheme cap are usually driven by a client request who is planning to enter into a high-value engagement with you. The higher Scheme cap enables a client to take legal action for a higher amount of damages than permitted under a lower Scheme cap, if an engagement is disputed.
(3) Scheme now applies to Entity members
The IPA Scheme can also limit the civil liability/damages to a PPC holders practice entity. The entity must be an Australian company that is registered with the Australian Securities & Investments Commissions (ASIC) and holds an Australian Company Number (ACN).
This is called entity Membership.
All directors of the entity must be Members of the IPA, CA ANZ and/or CPA Australia and must hold a PPC/Certificate of Public Practice (CPP) with the IPA or their respective professional accounting body. They must also be a Professional Standards Scheme participant of their professional accounting body at all times during the period of IPA Entity Membership.
At least one director of the entity must be an IPA Member, hold an IPA PPC and be a Scheme Participant of the IPA Scheme at all times during the period of Entity Membership.
(4) Scheme now applies for financial advisors
The IPA Scheme has expanded the scope of PPC holder protection to include all IPA PPC holders, including those that hold an AFS licence or a limited AFS licence with ASIC and Authorised Representatives of both of these AFS licence holders. There is no special registration required for these PPC holders. Simply, holding an IPA PPC will mean automatic inclusion in the Scheme.
(5) Member exemption from the IPA Scheme
Joint PPC holders that are covered under the CA ANZ and/or CPA Australia Scheme, can seek an exemption from the IPA Scheme. IPA PPC holders who wish to be exempt from the IPA Scheme should contact the IPA.
(6) Mandatory requirements for all Scheme Participants
Scheme Participants must complete the annual Professional Standards Declaration in February each year. This Declaration is part of the IPA’s reporting requirements to the PSC who have oversight on the IPA Scheme.
Scheme Participants must also use the disclosure statement on client correspondence, advertisements, websites, etc, which must state:
Liability limited by a scheme approved under Professional Standards Legislation.
Information about the disclosure statement requirements can be found here.
Scheme Participants must comply with Pronouncement 7 Continuing Professional Development, which requires 120 hours of CPD to be completed over each three-year CPD period.
As part of the 120 hours required, a minimum of 20 hours must be completed for each of the three CPD Competency Areas, being
- Technical and Product Knowledge
Technical knowledge of core accounting areas;
- Management and Professional Skills
Develop and manage the productivity, behaviour and operations of accountants in their environment; and
- Professional and Ethical Standards
Understand and apply the professional and ethical standards in the public interest to promote the professionalism and value of the accounting profession.
A link to Pronouncement 7 can be found here.
If you require further information about the IPA Scheme, please contact:
Ph: (03) 8665 3148
Ph: (03) 8665 3122