Financial Services Minister Daniel Mulino has managed something that only a government can: uniting the whole spectrum of an industry’s competing interests in displeasure.
On Wednesday morning, the minister announced that the $47.3 million Compensation Scheme of Last Resort (CSLR) special levy for the 2025-26 financial year would be spread across the entire retail-facing financial system.
Originally a bill reserved just for financial advisers – who have already begrudgingly contributed $20 million to the pot – the sector effectively had $37 million taken off its bill.
Yet not many are celebrating the prospect of another invoice landing with their licensee – though when exactly that will be is unclear given the 15-sitting-day disallowance period won’t expire until late March 2026.
Among the voices expressing their dismay is FAAA chief executive Sarah Abood, who acknowledged that spreading the special levy cost for FY26 will reduce the cost to advisers, however railed against the sector still being hit with the largest slice of the pie at 22 per cent.
“Advisers paying the largest share of the levy had nothing to do with the misconduct that gave rise to the need for consumer compensation. In that context, spreading the levy based on capacity to pay is the most just of the many unjust possible options,” Abood said.
“However, by choosing the ASIC funding levy as the basis for allocation, rather than spreading the impact on the basis of capacity to pay, the Minister has imposed an unsustainable additional financial burden on financial advisers.”
As she pointed out, the additional levy will take the cost for each adviser to more than $2,000.
“Our sector is made up of just under 6,000 primarily small and micro businesses. There is an average of only 2.6 advisers per practice, who are already struggling under ongoing significant cost pressures. It should be clear that our sector has the lowest capacity to pay of any of the sectors,” Abood added.
“We call on the Minister to reconsider this unjust additional levy that threatens the very viability of our profession. Nothing is achieved for Australians, particularly for those seeking retirement advice, if we drive out compliant financial advisers who are doing the right thing, by forcing them to pay for the misbehaviour of a small number of bad actors.
“We also urge the Minister to confirm that financial advisers will not be asked to pay the CSLR levy on the same basis in future years. Otherwise, this uncertainty will further accelerate departures from our sector and reduce the number of new entrants.”
Super unhappy
Unsurprisingly, other sectors being dragged into the CSLR payments weren’t pleased to be paying for something they were not involved in.
Super funds were the first to raise alarms, with the Association of Superannuation Funds of Australia (ASFA) particularly upset about trustees copping 12.9 per cent of the bill, or around $6.1 million.
“Forcing 18 million Aussies who are super fund members to fund the CSLR will set a dangerous precedent,” ASFA CEO Mary Delahunty said.
“It risks treating retirement savings as a convenient pot of money for solving problems, rather than keeping super focused on providing a dignified post-working life for Australia’s retirees.
“In a compulsory system, people must be able to trust that the government takes the legislated objective of super seriously. The objective of super is to preserve Australians’ savings so they can provide income in retirement. If the government sets the precedent of using people’s retirement savings for other reasons, that will undermine trust in the system.”
The Super Members Council (SMC) was similarly angry, again noting that this would push the bill onto “low and middle-income Australians”.
SMC head Misha Schubert argued that it is even more egregious given these members had “chosen the safeguards of the highly regulated super system to pay for misconduct in other high-risk financial products”.
“We urge the government to stop and rethink these issues to avert a grave escalation of moral hazard,” Schubert said.
“The design of this scheme needs to be reviewed carefully to avoid making the current problems and perverse incentives worse.
“It’s crucial to slam the door shut to stop consumers being harmed in the first place. Prevention is always better than clean up.”
While super fund trustees were never originally part of the CSLR to begin with, some sectors that were previously captured are also upset.
Mortgage & Finance Association of Australia (MFAA) CEO Anja Pannek said the outcome is disappointing for the broking industry and thousands of small broking businesses.
However, the method of calculation results in a 1.4 per cent contribution from mortgage brokers totalling around $667,529 – or just $7 per credit representative.
“This is an additional cost burden for our members and the industry,” Pannek said.
“We acknowledge the Minister’s transparency in today’s roundtable and welcome the broader reform program he outlined to improve the long-term sustainability of the CSLR.
“The sheer magnitude of the levy, not only in FY26, but also what has been flagged for FY27, highlights how critical it is that steps be taken to address the root cause of misconduct.
“We remain firm in our position: mortgage and finance brokers, who have one of the lowest levels of misconduct across the financial system, should not be required to cross-subsidise compensation for failures occurring entirely outside the credit intermediaries sub-sector in perpetuity.”
Sustainability now
The job of the opposition is pretty clear from the name, so it isn’t a shock that shadow financial services minister Pat Conaghan had some notes for Mulino, telling the government it needs to make the scheme sustainable.
“The CSLR levy has already blown out dramatically, and it will only get bigger from here. The 2027 levy estimate is already $137 million – and that’s without the First Guardian and Shield collapse, which could see it double. It is now so large that every Australian will be forced to foot the bill for the government’s inaction,” Conaghan said.
“A scheme designed to compensate victims must be sustainable. Right now, the CSLR is constantly running out of money, and almost a year after the Government announced a post-implementation review, it still has no credible plan to stabilise the scheme. Once again Labor’s solution is a bigger tax.”
Conaghan did, however, add that he is glad financial advisers aren’t the only ones being asked to pay into the CSLR.
“Financial advisers that have done nothing wrong shouldn’t be left to carry the full load when things go wrong. Our hope is that at the end of all of this we will have a more sustainable and fairer scheme,” he said.
He added: “Australians deserve a compensation scheme that is fair and sustainable, and a regulator capable of preventing failures in the first.”
There are a lot of different options that were available to Minister Mulino, but when even a $7 bill gets people upset, maybe there really was no outcome that would have satisfied anyone.
