Amended two or more years later
A BAS lodged in your last quarter can be amended by the ATO two or more years later.
BOOKKEEPER AND BAS AGENT INSURANCE
Retiring or Closing Your BAS Practice: Do You Need Run-Off PI Cover?
Professional indemnity is claims-made. It responds to claims notified while the policy is live, not to when the work was done. Cancel it the day you stop, with no run-off in place, and apart from circumstances you notified while the policy was live there is no policy left to respond to a claim about any BAS, payroll run or tax return you lodged. TPB(GS) 06/2010 recommends run-off cover for exactly this reason. Here is what it is, how long to keep it, and how insurers price it.
Claims-madePolicy must be live when the claim arrives
TPBGuideline recommends run-off on ceasing
1 to 7 yrsRun-off terms commonly offered
No new workRun-off covers past services only
Premiums and outcomes described are specific to this client and indicative only. Your own terms will depend on your circumstances and the insurer.
THE SHORT ANSWER
Does a BAS agent or bookkeeper need run-off professional indemnity cover when they retire or stop practising?
Yes, in practical terms. Professional indemnity in Australia is claims-made, so it only responds to claims notified while a policy is in force. If you cancel when you stop practising, a claim made afterwards about earlier BAS lodgements, payroll or tax returns will generally have no policy to respond, unless you notified the circumstances while the policy was still in force. The Tax Practitioners Board's guideline TPB(GS) 06/2010 recommends run-off cover for practitioners ceasing tax agent services and does not set a term. The markets we use commonly offer run-off for one, three, five or seven years, either as annual no-new-work renewals or as a single multi-year policy paid once, rated off your last annual premium.
Choose the term against how long a client could still claim: limitation periods that are commonly six years but vary by state, and ATO amendment periods of two to four years, are the usual reference points. Keep the same limit and retroactive date as your last live policy. General information, not legal advice.
- Basis of PI
- Claims-made and notified
- TPB(GS) 06/2010
- Run-off recommended, no set term
- Terms commonly offered
- 1, 3, 5 or 7 years
- Covers
- Past work only, no new services
Nothing about the work being done in an insured year matters if there is no policy when the claim lands. That is why the TPB's guideline TPB(GS) 06/2010 recommends that a practitioner who proposes to cease providing tax agent services during their registration period obtains run-off cover. The guideline does not prescribe a term. The reason is mechanical: a business that has closed still has exposure to claims arising from the work it did.
For a bookkeeper the exposure is concrete. Any of these can become a claim against you or your former company after the practice has closed.
Surfaces when an employee leaves
A payroll error can surface when an employee leaves.
Audited within the amendment period
A tax return you prepared can be audited within the standard amendment periods.
| Form | How it works | Best for |
|---|---|---|
| Annual run-off renewals | Your existing policy continues each year with a "no new work" condition. Premium steps down as the years pass and the exposure shrinks. | Practitioners winding down gradually, or unsure how long they want to hold it |
| Multi-year run-off, paid once | A single policy for a fixed term, commonly offered at one, three, five or seven years, paid up front. No renewals to remember. | Retirement, sale of the practice, or closing a company |
6 years Common limitation period, varies by state General information
2 to 4 years ATO standard amendment periods Small entities to others
1, 3, 5, 7 Run-off terms commonly offered Years
The term to choose is a judgement about how long claims can reasonably arrive. Limitation periods for claims in contract and negligence are set by each state and territory, are commonly six years, and can run from the breach or from when the loss is suffered or discovered rather than from when the work was done. The ATO's standard amendment period is generally two years for individuals and small businesses and four years otherwise. Seven-year run-off matches the long end; three to five years is a common compromise where the cost of seven is not justified. This is general information, not legal advice: check your own position if the term matters.
Run-off is rated off your last full-year premium and the term, and pricing varies by insurer. We quote both forms so the comparison is on the same limit and retroactive date. Indicative only, not a quote.
Retiring and letting TPB registration lapse
Arrange run-off from the date you stop, with the same limit and retroactive date as the last live policy. Tell the TPB you have ceased and how past work is covered.
Selling the practice
The buyer's policy usually covers only their own work from the sale date. Your run-off covers yours. The sale agreement should say who holds what.
Closing a company and continuing as a sole trader, or the reverse
The old entity needs run-off; the new entity needs a fresh policy with a retroactive date that covers the earlier work if you want continuity in one place. This comes up when a licence sits in a director's name and the trading entity changes.
Taking a job as an employee
Your employer's policy will not cover claims from your former practice. Run-off on the old practice, employer's cover for the new role.
Moving overseas
Run-off for Australian work already done is generally easier to arrange before you leave than after, and offshore domicile narrows the market, so raise it early.
FREQUENTLY ASKED QUESTIONS
Run-Off Cover FAQs
TPB(GS) 06/2010 recommends it, and the reason is structural: PI is claims-made, so a claim made after you have cancelled about a BAS you lodged last year generally has no policy to respond, unless you notified the circumstances while the policy was still in force. Run-off keeps a policy live for claims about past work while excluding new work. The guideline does not set a term, so the length is your call against the limitation and amendment periods that apply to your clients.
Long enough to see out the period in which a client could still bring a claim. Limitation periods for claims in contract or negligence are commonly six years in most Australian states and territories, though they vary and can run from when the loss is suffered or discovered. The ATO's standard amendment period is generally two years for individuals and small businesses and four years otherwise. The markets we use commonly offer one, three, five and seven year terms. Seven years covers the long end; three to five is a common compromise for a small practice. Confirm your own position with a lawyer if the term matters.
It is rated off your last annual premium and the term, and pricing varies by insurer. We quote annual run-off and the multi-year options on the same limit and retroactive date so they can be compared. For a sole practitioner whose live policy was under $1,000 a year, run-off sits at the lower end of the cost scale; whether it is worth it depends on the work behind you.
Often, and that is one form of run-off: where the insurer agrees, the policy continues with a no-new-work condition, and the premium typically steps down over the years. The alternative is a single multi-year run-off policy paid up front. Either way the limit and the retroactive date should match your last live policy.
Usually not. The buyer's policy covers their work from the sale date. Your run-off covers the work you did before it. The sale agreement should state who holds which cover, and for how long.
That you have ceased providing services and how claims about past work are covered. TPB(GS) 06/2010 recommends run-off cover for practitioners who cease providing tax agent or BAS services and does not prescribe a term. Keep the run-off certificate with your registration records.
QUOTE REQUEST
Get a run-off quote
Send your current policy schedule and the date you plan to stop. We will quote annual run-off and the multi-year options on the same limit and retroactive date.
Specialist broker review Australian business insurance
Close the Practice, Not the Cover
Run-off quoted at one, three, five and seven years against your last policy, so the decision is made on numbers rather than on a guess about how long the tail runs.