Speaking at the FAAA Congress on Wednesday morning, Financial Services Minister Daniel Mulino said that while there is no specific date set for an announcement of his Compensation Scheme of Last Resort (CSLR) special levy decision for FY26, however it is likely to be before the end of the year.
“We’re not looking at a long period of time before I can work through that – a matter of weeks. But I can’t give a particular date at this time,” Mulino said, adding that he isn’t simply looking at the FY26 levy, rather trying to “think through some of the more systemic issues”.
ifa understands that Treasury will be hosting a CSLR roundtable with industry stakeholders on 5 December, making the release of any details on the minister’s decision unlikely until after this process has been concluded.
Importantly, the minister said, he believes there needs to be as much focus as possible on prevention, rather than compensation.
“There are a bunch of mum and dads who have been affected by not just Shield and First Guardian, but all of the things which have led to the $47.3 million and the FY27 that are pre-Shield and First Guardian,” Mulino said, adding: “I know that there’s a pain point with FY26 and the years forward.
“But for me, the really important thing is that we need to deal with the systemic issues going forward and use this as an opportunity to come together on that, and I feel like there’s going to be a lot of common ground in this, in the industry.”
He added that one of the benefits of taking a preventative approach is that is would not only stop people going through these “traumatic situations”, but without going down the “prevention path, we are going to end up in a compensation arrangement which is not sustainable”.
“So, prevention does need to be the focus,” Mulino said.
“Second point is, I agree that in figuring out how we try to strengthen prevention or achieve more prevention, we don’t want knee-jerk reactions.”
Drafting shortfall slowing DBFO
While the minister was somewhat bullish on the likelihood of a CSLR special levy decision being imminent, he was less committal on giving a timeframe for the next stage of Delivering Better Financial Outcomes reforms being released, despite advice reform being a “real priority”.
“One of the constraints on the DBFO is that it is a complex set of reforms, and we really want to get this right, and we are coming up against drafting constraints in a range of areas,” Mulino said.
“I know that’s not a very satisfying answer, but the DBFO has just taken a bit longer than ideal, because we’re trying to step through that with as much urgency as we can. But we do need to take care of these reforms.
“I’m very conscious that we need to work closely with you on making sure that that new class of advice is appropriately defined and that there are the right guardrails around it, but I’m also very conscious of the need for us to be able to deal with red tape issues, so I think that the other issues we talked about are more likely to come through the public realm before this. But I’m really trying to push this through as quickly as I can.”
Speaking at a media briefing, FAAA chief executive Sarah Abood said it was clear that details on the CSLR special levy are likely to be released before the next round of DBFO.
“We’ve heard different timelines over the course of the year,” Abood said.
“We have heard that Shield and First Guardian has had an impact. We’ve heard that there are issues with trying to define the best interest duty and how it will apply to the new class in a way that’s consistent with a professional adviser … that is actually a really tricky problem to solve.”
Alongside the advice reforms, there are a range of other measures that are taking up Treasury drafting resources, such as the reworking of the Division 296 $3 million super tax, with draft legislation on that measure expected before Christmas.
“There really are scant resources for legislative drafting in Treasury,” Abood said.
DBFO must be done right
Also speaking at the Congress, shadow financial services minister Pat Conaghan said DBFO “should have been a priority”.
“Most recently we’ve heard the minister has put this on the backburner while he focuses on the First Guardian and Shield response,” Conaghan said.
“I think that’s unfortunate. DBFO should have been the priority, and legislative reform for First Guardian and Shield should have been done after they look at compensation for victims and reform to ASIC.”
However, the shadow minister also noted concern around the “direction of the DBFO work” and the introduction of a new class of adviser.
“If it’s done right, it could help deliver more advice to Australians who need it. But it has to be done right,” he said.
“After all the hoops your industry has jumped through – degrees, professional standards, compliance – it would be completely unfair to carve off a big chunk of the market for people who can’t meet those standards.
“At the very least, if they do, they need to ensure financial advice firms can hire this new class of advisers within their businesses.”
FAAA general manager of policy, advocacy and standards Phil Anderson noted that it had now been 1069 days since the delivery of the Quality of Advice Review final report.
“Sixteenth of December 2022 seems like a very long time ago,” Anderson said.
“We have been waiting a very long time. We remain optimistic that we are still going to get material benefits out of this.”
Speaking at the Association of Superannuation Funds of Australia (ASFA) Conference on the Gold Coast last week, Mulino said DBFO was complicated but the government “remain committed” to the reforms.
“This is a very complicated set of reforms for reasons everybody in this room knows well. It’s also a set of reforms which, if anything, is now a little bit more nuanced given recent developments, and I’ll touch on that later,” Mulino said.
“But I just want to stress to this room that I am committed to reforms, delivering reforms, which will enable people who can’t afford, or for where it’s not appropriate for them to have full‑fee advice, for them to receive appropriate guidance and advice.
“So, this is something that I remain committed to, the government remains committed to. We are working intently on this issue and we are moving towards the post‑draft‑legislation of the next set of legislation. But it is a complicated set of reforms, and I just wanted to flag that.”
In October, Treasury officials also cast doubt on a speedy release of draft legislation.
Speaking at a Senate economics legislation committee hearing, assistant secretary, financial advice, insurance and investment Andre Moore said Treasury is considering the outcomes of the consultation over the “super aspects of tranche two and reforms to statements of advice”.
