The Financial Planning Association (FPA) has questioned the amount of professional indemnity (PI) insurance advisers will require if they want to give tax advice.

It says a Tax Practitioners Board (TPB) exposure draft suggests they will need to add the same level of cover that is usually required for their whole business.

“The FPA notes the Tax Agents Services Act only applies to the tax (financial) advice service – the tax advice component of the financial advice business,” it says in a submission to the TPB.

“However, the exposure draft reads as if the TPB requires the same level of PI cover for the tax (financial) advice service as the Australian Securities and Investments Commission (ASIC) requires for the entire financial advice business of the licensee.”

The FPA says tax advice would be provided under an overall service to clients and charged on a bundled basis.

“They do not separate fees under the type of advice, such as super advice or tax advice. There is no simple way to determine how much of the fee is directly attributable to the tax advice services, and it is not possible to determine the total revenue from the tax advice services.”

ASIC’s minimum level of PI cover is $2 million, and the FPA says the TPB draft suggests this same figure applies to tax advice.

“The FPA understands this interpretation of the application of the TPB’s PI requirements is not intentional. We recommend the TPB consider amending its exposure draft to clearly and more accurately present its requirements, particularly in relation to how they integrate with ASIC’s requirements.”

The FPA says the regulations should not require advisers to have separate PI cover for tax advice. Instead, advisers should prove they have adequate cover.