The Compensation Scheme of Last Resort (CSLR) has announced that, with just a month left in FY24–25, the $24.1 million levied for the FY24–25 period “will not be fully utilised”, though it has not specified how much lower the actual cost will be.
Financial advisers shouldn’t expect a refund on the CSLR levies they have already paid, but there will be an offset to the total levies going forward.
According to the announcement, the volume and status of lodged claims likely to be paid in FY24–25 is lower than the amount initially estimated and the fees levied to cover these payments.
While it added that the claim volume originally estimated in December 2023 is “expected to eventuate”, claims have taken “longer than anticipated to reach the CSLR” and will be received in FY25–26.
“More precise details can be expected after the conclusion of the financial year,” the CSLR said.
According to CSLR chief executive David Berry, the scheme has seen multiple large-scale firm failures within the personal financial advice sector beyond the Dixon Advisory collapse, with at least two of these failures potentially leading to more than 800 claims.
“These failures continue to significantly impact the amount of compensation likely to be paid in the coming financial years. The key driver to the timing of payments remains the speed at which the CSLR receives claims,” Berry said.
“The projected underspend will be utilised to pay compensation in subsequent financial years and be offset against the FY27 levy estimate.”
In line with a lower number of claims paid, the CSLR said its operating costs are also tracking below the levy estimate.
There is no information yet about whether the speed of processing would also impact the subsequent FY25–26 levy estimate.
The amount estimated as attributable to the financial advice subsector for the period was $18.5 million, however the CSLR did not clarify whether this cost would be lower or if it was spread across the full $24.1 million allocated to all subsectors.
Advisers are still on the hook for an even bigger bill in FY25–26 – which the CSLR estimated would more than triple the sector cap as a result of determinations against United Global Capital and Dixon Advisory – making up $70.11 million of the $78 million total cost.
According to the CSLR at the time, these funds will support the processing of 1,800 claims across both the pre-CSLR levy and the FY25–26 levy estimate.
