Federal Budget tax changes: what accountants should know about professional indemnity risk
The Federal Budget has put tax advice back in the spotlight.
For accountants, the issue is not only what the changes may mean for clients. It is also how quickly clients may expect answers.
A client may ask whether to sell an asset, restructure a trust, buy a property, hold an investment or change how they claim work-related expenses.
In some cases, the rules may still be settling.
That is where professional indemnity risk can become more relevant.
The Budget contains no direct policy changes to professional indemnity insurance requirements for accountants. However, the reforms may increase PI risk because advice may be more complex during the transition period.
What you should know
Several Budget measures may create more client questions for accountants.
The Budget website1 says, “The Government will limit negative gearing to new builds from 1 July 2027, to focus tax support on new supply.”
It also says, “The Government will replace the 50 per cent Capital Gains Tax (CGT) discount with a discount based on inflation and introduce a minimum 30 per cent tax on gains from 1 July 2027.”
Treasury2 states that “From 1 July 2028, the government will introduce a minimum tax rate of 30 per cent for discretionary trusts, with some exceptions.”
Treasury also says the $1,000 instant tax deduction is part of the new tax settings for working Australians.
For accountants, these measures may lead to more review work, more client questions and more care needed when documenting advice.
Why this matters for accountants
Tax changes often create uncertainty before it creates clarity.
Clients may hear about Budget announcements before legislation, guidance and examples are available. Some may assume the changes apply to them straight away. Others may wait, then ask for urgent advice.
That mix can increase the risk of misunderstandings.
Marsh identifies CGT, negative gearing, the $1,000 instant tax deduction and discretionary trust tax changes as key reforms accountants may need to navigate.
The key point is simple: Budget announcements are not the same as personal advice.
Accountants may need to be clear about what has been announced, what has been confirmed and what still needs further detail.
Where professional indemnity risk may arise
Professional indemnity risk may arise when a client believes they suffered a loss because of professional advice or a failure to advise.
In this context, risk may increase if advice is given too quickly, if assumptions are not recorded, or if the advice does not explain its limits.
According to Marsh, the reforms may increase PI risk because they add complexity, leave key details unresolved, and may raise the risk of advice errors during the transition period.
That matters because Budget-related advice can involve large financial decisions.
A client may be considering whether to sell an asset, restructure a trust, make an investment decision, or change how they claim deductions.
If the rules later change, or if the client’s position was more complex than first understood, the accountant’s file notes may become very important.
Client pressure may increase
Many clients will not want a technical explanation first.
They may ask: “What should I do now?”
That is where accountants may need to slow the process down.
A careful answer may be more useful than a fast answer. It may also be safer.
Marsh notes that accountants may face increased pressure from clients to make reactive decisions or provide advice based on incomplete information.
This does not mean avoiding the conversation.
It means setting the right expectations.
Trusts, property and capital gains need careful handling
The areas most likely to create questions are capital gains tax, negative gearing and discretionary trusts.
These areas often link to long-term client decisions.
They may involve family groups, business owners, property investors, retirees or high-income clients.
Treasury says rollover relief will be available for three years from 1 July 2027 to support small businesses and others who want to restructure.
Marsh also notes that trust restructuring carries risk where the interaction with existing small business rollovers and state-based duty regimes is still to be released.
This is why accountants may want to review how they handle advice requests connected to Budget changes.
It may not be enough to say what the Budget announced.
The advice process should also make clear what has been checked, what assumptions have been used and what remains uncertain.
Practical habits that may reduce claim risk
Good process can help reduce misunderstandings. For Budget-related tax advice, accountants may want to consider:
- Maintaining clear file notes
- Using engagement letters
- Recording assumptions
- Escalating uncertain matters
- Documenting where legislation is unclear
This is not about creating more paperwork for the sake of it, it is about making sure the client understands what advice has been given, what it covers and what it does not cover.
Professional indemnity insurance still matters
Professional indemnity insurance is not a substitute for careful advice, but it may be an important part of an accountant’s risk review.
The Tax Practitioners Board (TPB)3 says professional indemnity insurance is “a consumer protection mechanism to compensate your clients in the event they suffer loss due to an act, error or omission as a result of tax agent services”.
The TPB also states that tax agents must maintain PI insurance that meets its requirements during their registration period.
Accountants should speak with their broker or insurer about whether their current professional indemnity arrangements remain suitable for the services they provide, the clients they advise and the type of tax work they do.
Staying informed
Accountants do not need to react to every headline.
But they do need a reliable way to keep track of official updates.
The ATO, Treasury, the Tax Practitioners Board and professional bodies such as CPA Australia can all play a role in keeping practitioners informed.
The risk is not just missing a change. It is giving confident advice before checking whether the detail is settled.
A simple internal review process can help. For example, firms may set regular time aside to review government updates, professional body alerts and guidance that affects active client advice.