CPA Australia, alongside other peak accounting bodies, has joined the slew of industry association calling the new Compensation Scheme of Last Resort funding unfair, arguing Treasury should reconsider inclusion of SMSFs.
CPA Australia, Chartered Accountants Australia and New Zealand (CA ANZ) and the Institute of Public Accounts (IPA) have released a joint submission to Treasury on the matter, stating changes will unfairly burden SMSF holders while failing to address the true causes of financial losses.
Superannuation lead at CPA Australia Richard Webb said carving out individual categories of real investors for reduced statutory rights would not resolve the CSLR’s funding challenges.
“Singling out specific groups of retail investors for the loss of statutory protections won’t fix the unsustainably expensive CSLR levy. It simply shifts costs onto investors while ignoring the upstream drivers of loss – including product failures and misconduct prior to advice and distribution,” Webb said.
As highlighted by CPA Australia, CSLR costs are rapidly escalating, expecting it to grow from just $4.8 million in 2024 to a staggering $75.7 million in 2026, and possibly rising again by 2027 to $127 million.
The ballooning of costs has already exceeded the $20 million annual subsector cap for financial advisers once triggering a special levy to be issued, something CPA Australia said demonstrates fundamental issues with the scheme’s funding model.
Webb, like many others in the industry, has emphasised the need for the scheme to genuinely live up to the ‘last resort’ part of its name.
“For the CSLR to deliver the greatest benefit, it must truly be a scheme of last resort, and that means the upstream links in the chain must work properly. A sustainable model requires all sectors responsible for those losses – particularly managed investment schemes – to contribute fairly,” he said.
“It’s critical that costs caused by product failures are internalised by relevant product issuers, rather than being borne by unrelated sectors through special levies.”
He added that strong product governance needs to be incentivised, rather than increasing system risk and cross-subsidisation.
“Making SMSFs fund the CSLR directly is poor policy, especially given that the current funding problems were caused by earlier failures. The people responsible for those losses should pay for them – not the investors who were harmed,” Webb said.
“The current CSLR regime already shows the unfair and disproportionate cost burden imposed on currently registered financial advisers and extending this to SMSFs simply compounds the problem.”
Other associations, such as the FAAA, have also questioned the CSLR’s funding model.
FAAA general manager of policy, advocacy and standards Phil Anderson has criticised the “waterfall approach” of funding, where advisers essentially pay the first $40 million of any payout before other sectors begin to contribute.
“That places a disproportionate burden on financial advisers and doesn’t reflect the broader range of parties involved in these failures,” Anderson explained.
“If you look at it in a normal operating environment, not just the extreme cases, requiring advisers to fund that first $40 million is not appropriate. It’s a significant impost on a small business sector and it’s not conducive to what we’re trying to achieve, which is growing the profession.”
