Insurer’s Notice to the Client: (These notices are subject to and do not affect the provisions of this Policy)

1. Non-Standard Policy

The terms and conditions of this Tax Audits & Investigations Professional Expenses Insurance Policy are distinct and exclusive from the terms and conditions of all other business insurances arranged  by us.  It may contain provisions which are unusual or different from any other policies and you should read the entire Policy carefully prior to entering into any contract.

2. Legal Advice

Your clients  can  e-mail  the  Advice Provider  via pfb@legalaccess.com.au for  legal advice  on  any problem  related  to their business,  trade  or profession.  The advice available is limited to the  law and practice of Australia.

This  insurance  is only  available  to  business  organisations   whose  Normal  Business  Activities  are conducted within the Territorial Limits.

3. Claims Made and Notified
   

This is a “claims made and notified” insurance  policy, which means  that  it provides cover only in relation to a claim against you that is:

1. first made against you during the Period of Insurance; and
2. notified by you to the Claims Administrator during the Period of Insurance;

provided  that  you were not aware  before  the  commencement of the  Period  of Insurance of any facts that alerted  you or would have alerted  a reasonable person in your position that the claim might arise (see GENERAL CONDITION  2 and EXCLUSION 3).

1. This   Policy  also   responds    to   “claims  circumstances”    notified   by  you   to   the   Claims Administrator during  the  Period  of  Insurance pursuant to  section  40(3) of the  Insurance Contracts Act 1984 (Cwlth), which provides:

Where  the Client gave notice in writing to the insurer  of facts that might give rise to a claim against the Client as soon as was  reasonably practicable after the Client became aware of those facts but before the insurance  cover provided by the contract expired, the insurer is not relieved of liability under  the contract in respect of the claim, when made, by reason  only that it was  made  after the expiration of the period  of insurance  cover provided by the contract.

1. This Policy does not provide cover for any professional costs or expenses that you incur before the Claims Administrator accepts the claim.

1. Please  note  that,  in addition  to  GENERAL CONDITION  2, special conditions  dealing with the reporting of claims apply to claims under the Tax Audit  and Investigation cover – see ‘WHAT IS COVERED’.

4. Your Duty of Disclosure

1. Before you enter  into an insurance contract,  you have a duty to tell us anything that you know, or could reasonably  be expected  to know, may affect our decision to insure you and on what terms.

1. You have this duty until we agree  to insure you. You have the  same duty before  you renew, extend, vary or reinstate an insurance contract.

1. You do not need to tell us anything that:

• Reduces the risk we insure you for: or

• is common knowledge; or

• we know or should know as an insurer; or

• as to which compliance with your duty is waived by the insurer.

1. If You Do Not Tell Us Something

1. If you do not  tell us anything  you are  required  to,  we may cancel your contract  or reduce the amount  we will pay you if you make a claim, or both.
2. If your failure  to  tell us is fraudulent,  we may refuse  to  pay a claim and  treat  the contract as if it never existed.

5. Material Alterations of Risk

1. You shall throughout the Period of Insurance disclose to us as soon as reasonably  practicable any material change in any fact, activity or circumstance as described in the Proposal.

1. The Insurer is entitled  to refuse  to cover the  additional  exposure  or to charge  a reasonable additional  premium  or, if the  nature  of the  change  in circumstances  entails  a substantially different  risk, whether in  type  or  degree,   from  that   previously  envisaged,  to  cancel  the contract or reduce its liability.

6. Waived Recourse Rights

Please  note  that  the  Policy excludes  any claim or claims where  and  to the  extent  Insurers have or would have rights of recourse  in respect  of such claim but you have granted  without the Insurers prior consent  a  waiver  of such  recourse  rights  to  others  whether by express  term  or  by reason  of an assumption  of liability under contract.

7. Enquiries, Complaints or Disputes

This Certificate is Insurance Council of Australia’s General Insurance Code of Practice compliant, apart from any claims adjusted  outside  of Australia.  Underwriters  at Lloyd’s proudly support  the  General Insurance Code of Practice.  The purpose of the Code is to raise standards of practice and service in the general insurance  industry.  Any enquiry or complaint relating to this Insurance should be referred  to London Australia Underwriting shown above in the first instance.  If this does not resolve the matter or you are not satisfied with the way a complaint has been dealt with, you should write to:

Lloyd’s Underwriters’ General Representative in Australia

Suite 2, Level 21

Angel Place

123 Pitt Street

SYDNEY NSW  2000

Tel: 02 9223 1433 Fax: 02 9223 1466

who will refer your dispute to Policyholder & Market Assistance at Lloyd’s.

Complaints that  cannot  be  resolved  by Policyholder  & Market  Assistance may be  referred  to  the Financial Ombudsman  Service (UK).   Further  details  will be provided  at the  appropriate stage  of the complaints process.

8. Service of Suit

The Insurer agrees that:

In the  event  of a dispute  arising under  this  policy, the  Insurer will at  your  request submit  to  the jurisdiction  of  any  competent  court  in  the  Commonwealth  of  Australia.  Such  dispute   shall  be determined in accordance  with the law and practice applicable in such court.

Any summons notice or process to be served upon the Insurer may be served upon:

Lloyd’s Underwriters’ General Representative Australia

Suite 2

Level 21 Angel Place

123 Pitt Street

SYDNEY NSW  2000

who has authority  to accept  service and to enter  an appearance on the Insurer’s behalf, and who is directed  at your request to give a written  undertaking  to you that he will enter  an appearance on the Insurer’s behalf.

If a suit is instituted against any one of the Lloyd’s Underwriters,  all Underwriters  hereon  will abide by the final decision of such court or any competent Appellate Court.

9. Privacy

Lloyd’s and its agents  are bound by the obligations of the Privacy Act 1998 as amended by the Privacy Amendment (Private Sector) Act 2000 (the Act). This sets out basic standards relating to the collection, use, disclosure and handling of personal information.

“Personal Information” is essentially information or an opinion about a living individual whose identity is apparent or can reasonably be ascertained from the information or opinion.

Information will be obtained  from individuals directly where  possible. Sometimes  it may be collected indirectly (e.g. from your representatives).

Only information  necessary  for the arrangement and administration of Lloyd’s business by Lloyd’s, its agents  and their representatives will be collected.   This includes information  necessary  to accept risk, to assess a claim, to determine competitive and appropriate premiums, etc.

Lloyd’s and its agents  disclose personal  information  to third parties  who they believe are necessary to assist them in doing the above.  These parties  will only use the personal  information  for the purposes we provided it to them for (or if required by law).

When you give Lloyd’s and its agents  personal  information  about  other  individuals, we rely on you to have made or to make them  aware that  you will or may provide their personal  information  to us, the types of third parties we may provide it to, ther relevant purposes  we and the third parties we disclose it to will use it for, and how they can access it.  If it is sensitive information  we rely on you to have obtained  their consent  on these  matters.  If you have not done  or will not do either  of these  things, you must tell us before you provide the relevant information.

You are entitled to access your information if you wish and request correction if required.

An individual who believes their  privacy may have been  prejudiced  has a right to make a complaint about  the  matter. In the  first instance,  your  complaint  should  be  addressed to  London Australia Underwriting.  This  may  be  done  either  verbally or  in writing  to  The Compliance Officer, London Australia Underwriting Pty Ltd, Level 9, 140 Arthur Street, North Sydney NSW 2060.

If you are dissatisfied with the response, you may refer the matter to Lloyd’s Australia Ltd, which has the appropriate authority  to investigate  and address  matters of this nature.  Lloyd’s Australia Ltd can be contacted at:

Suite 2

21 Angel Place

123 Pitt Street

Sydney NSW 2000

Phone 02 9223 1433 Fax 02 9223 1466.

Lloyd’s Australia Ltd will respond  in writing within 15 working days, and if you remain dissatisfied with their response  you will be provided at that  time with the  details of any other  avenues  for resolution that may be available to you.

10. Terrorism Insurance Act 2003 Notice

The Insurer has treated this Insurance (or part of it) as an Insurance to which the Terrorism Insurance Act 2003 (TIA) applies. TIA and the supporting regulations made under the Act deem cover into certain policies and provided that the Terrorism exclusion to which this Insurance is subject shall not apply to any “eligible terrorism loss” as defined in TIA.

Any coverage  established by TIA  is only in respect  of any “eligible terrorism  loss” resulting  from a “terrorist  act” which is a “declared  terrorist  incident”  as defined  in TIA.  The Terrorism exclusion to which this Insurance is subject  applies in full force and effect to any other  loss and any act or event that is not a “declared terrorist  incident”.

All other  terms, conditions, Client coverage and exclusions of this Insurance including applicable limits and deductibles  remain unchanged.

If  any  or  all of  the  Insurers  have  reinsured   this  insurance  with  the  Australian Reinsurance  Pool Corporation, then  any  such  Insurers  will not  be  liable  for  any  amounts   for  which  they  are  not responsible under the terms of TIA due to the application of a “reduction percentage” as defined in TIA which results in a cap on the Insurer’s liability for payment for “eligible terrorism losses”

TAX AUDITS & INVESTIGATIONS PROFESSIONAL

EXPENSES INSURANCE POLICY

Effected through London Australia Underwriting Pty Ltd (hereinafter called the Coverholder)

THIS IS TO CERTIFY that in accordance  with the authorisation granted  under Contract No. B0621P33093415 to the   undersigned  by  certain   Underwriters   at   Lloyds,  whose   definitive   numbers   and   the   proportions underwritten by them,  which will be  supplied  on application,  can be  ascertained by reference to  the  said Contract, and  in consideration of the  premium  specified  herein,  the  said Underwriters  are  hereby  bound, severally and not jointly, each for his own part and not for one another, their Executors and Administrators, to insure in accordance  with the terms and conditions contained  herein or endorsed hereon.

DEFINITIONS (words with special meaning)

In  this  Policy, unless  the  context  otherwise  requires,  the  following words  and  expressions  shall bear  the meaning set out below:

1. Advice Provider

means   the   person   or  company   specified  as  “Advice  Provider”  in  the   Schedule   or  appointed subsequently by the Insurer, who provides the legal advice service under  this Policy on the Insurer’s behalf.

2. Annual Aggregate Limit

means  the  amount  specified  as “Annual  Aggregate  Limit”  in the  Schedule  being the  maximum  the

Insurer will pay for all Claims notified under this Policy during the Period of Insurance.

3. ATO

means  the  Australian Taxation Office or appropriate government authority  or agency authorised to conduct the relevant activity.

4. ATO Investigation

means an exercise by the ATO of the powers granted to it by means of the Taxation Administration Act

1953 to investigate the Client’s returns  of income or profit from a trade,  profession or business under

Income Tax Legislation.

5. Claim

means  an enquiry, investigation  or audit conducted by the  ATO or State or Territory Authority of a kind described in the Sections of Cover under “WHAT IS COVERED” that:

1. is first begun  against  the  Client  during  the  Period  of Insurance  and  notified  to  the  Claims Administrator before the end of the Period of Insurance; or

1. first comes to the knowledge of the Client during the Period of Insurance and is first notified to the Claims Administrator before the end of the Period of Insurance;

6. Claims Administrator

means the company specified as “Claims Administrator” in the Schedule or appointed subsequently by the  Insurer, which administers  the  Claims under  this  Policy on the  Insurer’s behalf  and  to  whom notification of a Claim must be made.

7. Client

means  the client(s) of the  Policyholder  whose registered office or principal trading address  is within the Territorial Limits and who have engaged the Policyholder’s accountancy services.

8. Client’s Costs

means the professional fees and disbursements payable by the Client to the Policyholder in respect  of the Claim, which have been  incurred  with the prior written  consent  of the Claims Administrator and whose reasonable amount  is determined by agreement of the Claims Administrator, but excludes any such fees and disbursements recovered  by the Client.

9. Court or Tribunal

means a court, tribunal or other statutory body of competent jurisdiction within the Territorial Limits.

10. Coverholder

means  London Australia Underwriting  Pty Ltd, which is the  Insurer’s agent  for the  purposes  of this

Policy.

11. Cwlth

denotes the legislation being referred  to is a Commonwealth of Australia Consolidated Act.

12. Director

means a director or other board member  of the Client where the Client is a company.

13. Excess

means the amount  indicated in the Schedule to this Policy which the Policyholder must bear each and every Claim before the Insurer is obliged to make any payment of indemnity.

14. Fringe Benefits Audit

means  an audit or investigation  by the ATO regarding the amount  of tax payable by the Client under the Fringe Benefits Tax Assessment Act 1986 in respect of fringe benefits.

15. GST Audit

means an audit or investigation by the ATO exercising its powers under the A New Tax System (Goods and Services Tax) Act 1999 regarding the amount of GST payable by the Client.

16. Income Tax Legislation

means either or both of the Income Tax Assessment Act 1936 (Cwlth) and the Income Tax Assessment

Act 1997 (Cwlth).

17. Insurer

means Certain Underwriters at Lloyd’s specified as “Insurer” in the Schedule.

18. Limit of Indemnity

means  the  amount  specified  as “Limit of Indemnity” in the  Schedule  being the  maximum  sum the Insurer will pay in connection  with the one event or series of events  attributable to a single source or cause or to a single set of circumstances,  from which the Excess is deducted, and is subject always to the Annual Aggregate Limit.

19. Normal Business Activities

means the Client’s normal business activities as declared to the Policyholder.

20. Partner

means where the Client is a partnership, any of the partners within that partnership.

21. Period of Insurance

means the period specified as “Period of Insurance” in the Schedule.

22. Policy

means the contract of insurance between the Insurer and Policyholder as set out in this document and the Schedule.

23. Policyholder

means  the  accountant or firm of accountants regulated  by their  professional  body/association who have declared  clients to the Insurer for coverage  under  this Policy and who will act on behalf of the Client in respect of the resolution of a Claim.

24. Schedule

means the Schedule to this Policy.

25. State or Territory Authority

means a relevant State or Territory department, body, agency or Office of State Revenue exercising relevant Commonwealth, State or Territory legislation in bringing a Claim against the Client.

26. Territorial Limits

means the Commonwealth of Australia and its external territories and an Australian State or Territory.

Please Note:

Reference to any statute or statutory provision and orders or regulations there  under shall include a reference to that statute, provision, order or regulation as amended, re-enacted or replaced from time to time.

Unless the context otherwise  requires reference to the singular includes the plural and the plural includes the singular.

Headings are for convenience only and do not affect the interpretation or form part of this policy.

WHAT IS COVERED

The Insurer provides indemnity under the following Sections of Cover subject to the terms of this Policy

and up to but not exceeding the Limit of Indemnity and the Annual Aggregate Limit:

Tax Audits and Investigations

1. The  Client’s  Costs  of a Claim arising directly from a GST Audit  with the  ATO where  the  ATO  is seeking additional amounts  of GST. For the purpose  of this clause, the Claim is first made against the Client on the earliest of the following:

1. the  date  on which the  ATO requests a meeting  with the  Client  or enters  the  Client’s

premises or expresses dissatisfaction with any of the Client’s GST returns  in writing;

2. date  on which the  Client or his or her adviser first became  aware,  or could reasonably have become aware, that a GST Audit was likely to arise with the ATO; or

3. the date on which the Client is served with a notice of assessment or amended notice of assessment relating to the additional amounts  of GST.

2. The Client’s Costs of a Claim arising directly from a Fringe Benefits Audit. For the  purpose  of this clause, the Claim is first made against the Client on the earliest of:

1. the date on which the ATO expresses  dissatisfaction with the amounts  of FBT (as defined in the Fringe Benefits Tax Assessment Act 1986) paid by the Client or his or her returns relating to FBT; or

2. the  date  on which the  ATO starts  an investigation  into the  accuracy of FBT returns  or information   or  into  the   Client’s  liability to  pay  additional   tax  because   of  alleged inaccuracies in such returns  or information.

3. The  Client’s  Costs  arising  directly  from  an  ATO  Investigation  in  respect   of  a  Claim  being  a notification from the ATO that it is taking action, carrying out an audit or an investigation, or making an enquiry under the provisions of Income Tax Legislation.

4. The Client’s Costs arising directly from a Claim being an audit or investigation undertaken by a State or Territory Authority in relation to:

1. Payroll tax;
2. Land tax; or
3. Stamp duty.

Superannuation Fund Investigations

5. The Client’s Costs of a Claim arising directly from an audit of the Client’s Regulated Superannuation Fund by the Australian Prudential Regulation Authority or the Federal Commissioner of Taxation.

Workers Compensation Audits

6. The Client’s Costs arising directly from a Claim being an audit of a Workers Compensation return undertaken by a relevant authorised body.

Conditions

7. In addition to the General Conditions, the Client must contact  the Policyholder as soon as possible after the Claim is first made and comply with the advice given by the Policyholder;

8. The Client must have maintained and must continue  to maintain  accurate,  truthful  and up to date records  and  make  returns   in due  time  in accordance   with  statute and  accounting  conventions acceptable to the ATO or State or Territory Authority where  applicable and have made  all returns and payments  except those which are disputed  and provide all information to relevant authorities in due time;

9. The Client and the Policyholder must provide information to the ATO or State or Territory Authority in due  time  and  must  comply with any statutory notice  requesting  information  which is not  the subject of an appeal;

10. The Policyholder  must immediately  notify the Claims Administrator in writing of any invitation by the ATO or State or Territory Authority to make an offer in settlement; and

11. The  Policyholder  must  provide  copies  of relevant  correspondence between the  ATO or State  or Territory  Authority  and  the  Policyholder  and  the  Client  (including the  notice  of  investigation) together with copies of the accounts, tax computations and returns  giving rise to the investigation.

What is Not Covered

The following exclusions apply in respect of this Policy:

1. Tax Disputes and Investigations

1. Any costs incurred in dealing with routine matters and reviews which do not fall within a Claim by the ATO or a State or Territory Authority in respect  of a GST Audit, Fringe Benefits Audit, ATO   Investigation  or   investigation   into   Payroll  Tax,   Land  Tax   or   Stamp   Duty,  or   a Superannuation Fund.

1. Any costs  or legal fees  incurred  in respect  of a court  action  or prosecution  arising out  of a

Claim.

1. In respect of an ATO Investigation only:

1. costs  arising after  the  issue of a notice  under  Income  Tax Legislation  notifying the

Client that the investigation has been completed; and/or

1. costs incurred in respect of an amendment under Income Tax Legislation; and/or

1. costs incurred otherwise  than wholly in connection  with an ATO Investigation into the

Client’s business profits. Where appropriate, Policyholder’s fees will be apportioned.

1. Any Claim where:

1. deliberate mis-statements have been made in respect of accounts, returns  or any other submissions made to the relevant authorities with intent to deceive;

1. the  Client has  failed to  notify his or her  business  status  to  the  relevant  authorities within  a statutory period;

1. there   has  been  a  failure  to  maintain  or  submit  accurate,   truthful  and  up-to-date records and returns  or a failure to observe statutory time limits or requirements;

1. a false representation  has been  made  either  knowingly or without  belief in its truth and  this  has  resulted   in  a  mis-statement  of  amounts   payable,  expenses   claimed, income or profits chargeable  or losses allowable for tax or contributions purposes  or of expenses payments  made.

1. Any Claim arising from or relating to:

1. an investigation or enquiry by the Investigations and Prosecutions  Division of the ATO

or following the transfer of an enquiry to that Division;

1. avoidance   schemes   relating   to   tax   or  superannuation   contributions   under   the

Superannuation Industry (Supervision) Act 1993 (Cwlth); and/or

1. GST refunds in countries outside Australia or Import GST.

2. Excess and Various Liabilities

The Insurer will not pay for:

1. the Excess;

1. compensation, damages,  interest, penalties  or taxes which the Client or his or her Partners or

Directors are ordered  or agree to pay.

3. Excluded Claims

1. Any Claim:

1. notified to the Claims Administrator after the Period of Insurance expires;

1. where  the Client or Policyholder’s delay during the Period of Insurance in notifying the Claims Administrator has prejudiced the Insurer’s position;

1. where,   before   the   commencement  of  the   Period   of  Insurance,  the   Client  or Policyholder  was aware,  or should have been  aware,  that  a Claim was likely to be made;

1. where,   before   the   commencement  of  the   Period   of  Insurance,  the   Client  or

Policyholder was aware of facts or circumstances  that might give rise to a Claim;

1. more specifically insured or any amount  that  the Client cannot  recover from a more specific insurance  because  the  insurer  refuses  the  claim for indemnity  under  the other insurance;

1. where  no Court or  Tribunal will or would entertain a hearing  on the  substantive merits of the dispute  or which is otherwise  not within the  jurisdiction of a Court or Tribunal.

1. Any claim for indemnity under the Policy which is false, fraudulent or exaggerated.

1. Any Claim concerning or arising from:

1. a  dispute  between the  Policyholder,  Client,  Coverholder,  Claims  Administrator,

Advice Provider and/or Insurer about this Policy;

1. an application for judicial review.

1. Any civil claim against the Client arising from:

1. the death  or injury to any person  including (without limitation) any sickness, disease or any naturally occurring condition or degenerative process;
2. the  loss destruction or  damage  to  property  owned  or  occupied  by or  under  the control of a third party.

4. Excluded Costs

1. All costs associated  with an appeal.

1. All costs that  the  Client pays or agrees  to pay before  the Claims Administrator has accepted the Client’s claim for indemnity in writing.

1. All costs greater  than agreed by the Claims Administrator.

1. All costs arising from the Client’s or Policyholder’s unreasonable behaviour or failing.

1. All costs arising from breach of the Client’s or Policyholder’s duties under this Policy or acts of the Client or the Policyholder that cause prejudice to the Insurer.
2. All   costs  arising  from  the   Client   acting  against   or  differently   from  the   advice  of  the

Policyholder.

1. All costs incurred in unnecessary correspondence.

1. All costs incurred by any party other than the Policyholder.

5. Claims not arising from Normal Business Activities

This  Policy does  not  provide  cover  in relation  to  Claims  not  arising out  of the  Normal  Business

Activities.

6. Professional Negligence Claims

This Policy does not provide cover in relation  to Claims against the Client or any Partner or Director for alleged negligent act, error or omission of a type normally covered  under  professional  indemnity, directors and officers, management liability or similar insurance.

7. Terrorism / War and Contamination Exclusions

1. This Policy does not cover any claims or legal proceedings  (including any costs or expenses  of any description) arising out of or in connection  with:

1. war (whether  declared  or not), invasion, acts of a foreign enemy,  hostilities, or any similar act, condition  or warlike operation, warlike action  by a regular  or irregular military force or other  authority  to hinder  or defend  against an actual  or expected attack;

1. insurrection,  rebellion, revolution, riot, attempt to usurp power, popular uprising, or any action taken by any governmental or martial authority  in hindering or defending against any of these;

1. discharge,  explosion,  or  use  of  a  weapon   of  mass  destruction,  whether  or  not employing  nuclear  fission or  fusion, or  chemical,  biological, radioactive  or similar agents, by any party at any time for any reason;

1. any claims or legal proceedings  (including any costs or expenses  of any description) arising out of or in connection  with any terrorist  action (regardless of any other cause or event  contributing  concurrently  or in any other  sequence to the  liability) or any action taken in controlling, preventing or suppressing terrorist  action.

1. This Policy does not cover any claims or legal proceedings  (including any costs or expenses  of any  description)   arising  out  of  or  in  connection   with  any  pollution,  seepage,   discharge, dispersal,  release  or escape  of any solid, liquid, gaseous  or thermal  irritant  or contaminant including, but  not  limited to, smoke,  vapours,  soot,  dust,  fibres, fungi, mould, fumes,  acids, alkalis,  chemicals   and   waste   (including  but   not   limited   to   material   to   be   recycled, reconditioned   or   reclaimed)   or   contamination   of   any   kind;   or   ionising  radiation   or contamination by radioactivity from any nuclear  fuel or from any nuclear  waste  or from the combustion  of nuclear  fuel; or radioactive,  toxic, explosive or other  hazardous  properties of any explosive.