CSLR warns compensation could stall without special levy funds

In July, the CSLR released its revised FY2025–26 levy, allocating $67.29 million to financial advisers – well above the $20 million subsector cap. In response, on 1 August, Treasury launched a CSLR consultation to explore options to fund the excess $47.29 million levy.

With the consultation period concluded, the profession now awaits Financial Services Minister Daniel Mulino’s decision on who will bear the cost of the special levy.

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However, speaking on The ifa Show prior to the end of the consultation period, CSLR chief executive David Berry said that if the minister doesn’t make a decision by the end of the first sitting week in September, the CSLR will become restricted due to a lack of funds.

“We know that, without the special levy funds, come November this year, we will stop making compensation payments for anything other than the pre-CSLR, which is predominantly the first tranche of Dixons,” Berry said.

Berry explained that the main challenge is timing. Namely, even after the minister makes a decision, it must still be approved by Parliament. This includes a 15-sitting-day disallowance period, and as of 5 September, only 15 sitting days remain in 2025 when both houses are scheduled to meet.

“It’s more likely to be February, March … Once it passes, assuming there is no motion to disallow, ASIC will need to issue the levies, collect the money and get it to us,” he said.

“I think it’s unlikely that we’re going to receive these special levy funds before 1st of July next year.”

While Berry said the CSLR will continue its work, it will be unable to pay out claimants.

“We’ll get it all ready up to make the offers to claimants, but it’ll just sit there until the funds come through. That’s something we’re going to have to navigate,” he said.

“That’s the legislative process. There’s no shortcuts here. We need to go through this. There needs to be a level of due process. So, I’m not saying this from a woe is us point of view, it’s just, there are impacts.”

The situation becomes even more complicated as the levy estimates pile up. Namely, ASIC has just issued the FY25–26 levy, and the first FY25–26 levy estimate is set to be released in October.

“We’re certainly encouraging the minister’s office to please make a decision, but that’s at his discretion and we’ll support whatever decision he comes out with. We just know that there are a lot of people that from November this year will be waiting,” he said.

Speaking on the future of the CSLR, Berry said: “We would expect substantial levies over the next few years.”

Touching on advisers’ concerns that they could be forced to foot the bill on the special levy, Berry said that while that is an option, “there are other options on the table that are probably more likely to be considered”.

“Anything that will help support the victims and make sure that the scheme is sustainable, we’re quite open to talk through debate and challenge. We recognise this sits with the minister and he’ll have many competing ideas and methodologies to listen to,” he said.

Regarding the suggestion that certain products be rolled into the CSLR to help cover some of the costs – especially given the widespread view that product failures are a major source of CSLR claims – Berry said this could be challenging, but potential avenues do exist.

“We really don’t have an opinion on this. I know there’s certainly arguments of should products be included? We’re agnostic on that. I think the hard part with that is, that’s a fun job for AFCA to try and work out, well, how much should be apportioned to the product and how much should be to the adviser? If the minister was to make the change, we’d support it,” he said.

“I think there’s greater scope though in the inclusion of products in the special levy as opposed to the eligibility criteria for the scheme.”

To hear more from David Berry, tune in here.