What PI Insurance Covers for Australian CPA Practices
Professional indemnity (PI) insurance covers claims made against your practice for financial loss arising from a breach of professional duty — an error, omission, or negligent act in the course of providing professional services. For tax agents and BAS agents, PI insurance is mandatory under the Tax Practitioners Board (TPB) registration requirements.
PI insurance covers the practice entity — the registered agent — not the individuals who produced the work. This is the critical point when it comes to offshore subcontracting: the policy covers claims against your ABN and registration, and the claim arises from the service your practice provided to the client, regardless of who prepared the underlying work.
This means that if a BAS was incorrectly prepared — whether by a local bookkeeper, an offshore Indian CA firm, or your own staff — and the client suffers a loss as a result, the claim is against your practice. Your PI policy responds to that claim if the policy is properly maintained and the subcontracting arrangement was disclosed.
Does Offshore Subcontracting Affect Your PI Cover?
It can — but not automatically, and not for the reason most people assume. The risk is not that offshore work is inherently excluded. The risk is non-disclosure.
Most PI policies require you to disclose material changes to your practice at renewal. Using offshore subcontractors for the first time is a material change. If you start subcontracting work to an Indian CA firm during the year and do not disclose it at your next renewal, the insurer may argue — if a claim arises — that the failure to disclose voids their obligation to respond to the claim.
| Claim Scenario | Typical PI Position | What Affects Cover |
|---|---|---|
| Error in BAS workpaper prepared by Indian team, reviewed and signed off by you | Covered — claim is against your practice for the service you delivered | Disclosure to insurer at renewal |
| Error in BAS workpaper delivered to client without your review | Potentially covered but riskier — your review is evidence of supervision | Whether supervision model is genuine |
| Data breach by Indian CA firm exposing client financial data | Likely not covered under PI — this is a cyber liability claim, not professional negligence | Separate cyber policy required |
| Indian CA firm gives client incorrect tax advice directly | Not covered — advice not given under your supervision or in your name | Indian team must not give advice directly to your clients |
| Missed deadline because Indian team delivered late | Potentially covered if you had a system to monitor and catch the delay | Your internal deadline management process |
What to Check in Your Existing Policy
Before your next renewal, read the following sections of your PI policy wording:
- Subcontractor clause: Some policies exclude claims arising from work performed by subcontractors who are not named in the policy schedule. Check whether your policy has this exclusion and whether offshore subcontractors require specific endorsement.
- Geographical limitation: Some policies are written for services delivered in Australia. If the preparation work is performed offshore, check whether this triggers a geographical exclusion. In most modern policies written for accounting practices, the geographical clause applies to where the client is located (Australia), not where the work is performed.
- Disclosure and notification obligations: Read the conditions section carefully. Most policies require you to notify the insurer of any material change in the nature or scope of your practice during the policy period — not just at renewal.
- Supervision requirement: Some policies condition cover on the insured maintaining adequate supervision of all work produced on their behalf. Document your review process — what you check, when you check it, and what records you keep.
If you are unsure about any of these clauses, do not interpret them yourself. Get written clarification from your insurer or broker before starting the offshore engagement.
What to Ask Your Insurer or Broker
Send your insurer or broker a brief written description of the arrangement and ask the following specific questions:
- Does the policy cover professional negligence claims arising from bookkeeping preparation work performed by an offshore subcontractor (Indian ICAI-registered CA firm) under the supervision of our registered practice?
- Is there a subcontractor exclusion clause in the policy that would apply to this arrangement?
- Is there a geographical limitation that would affect cover for work prepared offshore?
- Do we need to disclose this arrangement at renewal, and is there any endorsement required to confirm coverage?
- Does the supervision and sign-off model we use (all work reviewed and approved by a registered agent before delivery to the client) satisfy the supervision requirement in the policy?
Request their response in writing — email is fine. This documentation is your protection if a claim is ever disputed on coverage grounds.
Contractual Protection — Your Engagement Agreement with the Indian CA Firm
A written agreement between your practice and the Indian CA firm is not optional — it is the primary evidence that the subcontracting relationship is structured and supervised rather than ad hoc. The agreement should cover:
- Scope of work: A clear description of what the Indian team prepares (reconciliations, BAS workpapers, payroll processing) and what they do not do (give advice to clients, sign off on anything, communicate with clients independently).
- Supervision model: An explicit statement that all work prepared by the Indian team is reviewed and approved by your registered practice before delivery to any client. This protects you under both PI and TPB requirements.
- Confidentiality and data security: The Indian firm's obligations regarding client data — how it is stored, who can access it, what security standards apply. This section feeds into your Privacy Act APP 8 compliance obligations. See our data security guide for the full picture.
- No sub-subcontracting: The Indian firm cannot pass your client work to a third party without your written approval. This is important for PI — your insurer accepted the arrangement based on the Indian firm's qualifications and supervision model. A third party introduced without disclosure changes the risk profile.
- Indemnification: The Indian firm indemnifies your practice for losses arising from their own negligence or breach of the agreement. Note that this indemnification is only as valuable as the Indian firm's financial position — which is why asking about their own PI insurance is worthwhile.
- Indian firm's PI insurance: Request evidence that the Indian CA firm holds professional indemnity insurance in India. This provides a secondary layer of protection — if a loss can be shown to have arisen from the Indian team's negligence rather than your review failure, their policy may also respond.
TPB Obligations — You Are Responsible for All Work Delivered Under Your Registration
Under the TPB Code of Professional Conduct, a registered tax agent or BAS agent is responsible for all services provided under their registration — regardless of who produced the underlying work. This is a non-delegable responsibility.
What this means in practice:
- You cannot tell a client "the error was made by our Indian subcontractor, they are responsible." The client engaged your practice. Your registration is on the work. You are responsible.
- Your PI policy must cover the claim. The Indian CA firm's PI is secondary — useful if you are seeking indemnification from them internally, but not a substitute for your own cover.
- Genuine supervision is required — not nominal sign-off. The TPB expects that registered agents exercise professional judgement over work delivered under their registration. If your review process is cursory or non-existent, you are not meeting your Code obligations regardless of what your engagement agreement says.
The practical standard: review the month-end pack with the same level of scrutiny you would apply to work done by a junior Australian staff member. You are not expected to redo the work — you are expected to catch material errors before they reach the client. Document what you check and what sign-off process you follow. This documentation is your defence if the TPB ever questions your supervision model, and it is what your PI insurer will want to see if a claim is made.
Written by Sharma Jyoti, CA (ICAI) — Founder, Sharma Jyoti and Co. We are an ICAI-registered Chartered Accountant firm providing outsourced bookkeeping and accounting services to Australian, US, UK and Canadian businesses. Learn more about our firm →
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