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Practice entity membership: maximising liability benefits
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Practice entity membership is an optional membership for practices that are entitled to use the ‘Chartered Accountants’ description. A number of practices have taken up this kind of membership, since it became available in August 2007. 
 
What is the benefit of practice entity membership? 
Now that the Institute liability capping schemes have commenced in all states and territories (except Tasmania), members in practice are turning their attention towards ensuring they benefit from the cap. 
 
The capping schemes specify Certificate of Public Practice (CPP) holders, affiliate and practice entity members (except financial services licensees) as participating members.  
 
Members providing services through an incorporated entity should consider the following issues in deciding whether to apply for practice entity membership:

  • The incorporated practice entity itself will only get the benefit of the cap if it is a participating member of the scheme ie. a practice entity member and the other requirements of the legislation and scheme are met
  • Professional standards legislation (PSL) only gives the benefit of the cap for ‘occupational liability’, that is:  
     
    ‘Civil liability arising … from anything done or omitted by a member of an occupational association acting in the performance of his or her occupation.’ 
     
  • If the court decides that the act or omission is that of the incorporated entity. The cap would then only be available if the incorporated entity is a practice entity member of the Institute
 
Not all practices qualify as ‘practice entity members' 
To qualify as a practice entity member, the entity must be capable of utilising the description ‘Chartered Accountants’ (see Institute Regulation 1205). Broadly speaking, Regulation 1205 states that the ‘Chartered Accountants’ description can only be used by an entity where all of the principals are individual members with a CPP or affiliate members. 
 
Important disclaimer 
This information regarding the Institute’s limitation of liability scheme(s) is a general guide only. It is not intended as professional advice, and you should rely on your own inquiries and assessment and other suitably qualified and specific professional advice. 
 
The Institute expressly disclaims all liability for any loss or damage arising from reliance upon the information in this article. 
 
For more information 
The Institute has a dedicated section on its website for both practice entity membership and liability capping. For more advice, members can also call the Institute’s Professional Standards consultants on 02 9290 5627. 
 
Relevant links:  
 
 
Last updated: Thursday 3 July 2008