Following the mid-year budget update on Wednesday, the Super Members Council (SMC) urged the government to “rethink its decision” that would see super fund trustees given some of the bill for the $47.3 million special levy.
“Super tax receipts are expected to increase by $10.9 billion over the forward estimates from 2025-26 compared to the estimates in March’s Budget, a 10 per cent increase on the already-high levels estimated in the last update,” the SMC said.
“Despite that, the government is asking poorer Australians, already feeling squeezed by cost-of-living pressures, to help plug a hole in the Compensation Scheme of Last Resort (CSLR) due to financial misconduct from others in high-risk products.
“The CSLR was created to compensate victims of financial misconduct as a last resort after all other options to recover money had been exhausted. A key design principle was that the parts of the financial services system from which the consumer harms had arisen would bear that cost.
The government would be breaching that principle by forcing millions of everyday Australians who are members of highly regulated profit-to-member super funds to pay into the scheme.”
While the levy is to be spread more broadly than just the financial advice subsector, it is still set to take the heaviest hit. Advisers will have to pay for 22 per cent of the additional amount, or around $10.4 million.
Credit providers will pay 15.3 per cent, responsible entities will cover 13.7 per cent, super trustees 12.9 per cent, and all other sub-sectors are on the hook for less than 10 per cent each.
For super fund trustees, this represents a cost of around $6.1 million.
While no sector wants to pay and many are concerned the decision will set a blueprint for future, even larger levies, Financial Services Minister Daniel Mulino’s announcement said the 2025-26 special levy is “not taken to set a determinative precedent for levy decisions in future years”.
However, the SMC remains adamant that the government that “if those in highly-regulated and well-run parts of the system foot the bill for misconduct elsewhere, it will escalate risky behaviour creating moral hazard, weaken accountability, and make some consumers pay twice”.
Alongside pointing to young and low-income workers as being unfairly impacted, the SMC also sought to push some of the onus onto “wealthier Australians with self-managed super funds”.
SMSFs are not part of the levy as currently constructed, however some of the reporting following the CSLR roundtable last week said rolling them into the levy is being considered – though exactly how is as yet unclear.
“[SMSFs] will not be levied in 2025-26, despite about 80 per cent of existing claims on the CSLR scheme relating to advice in that sector,” the SMC said.
“That’s why the Super Members Council is urging the government to rethink its approach and focus on reforms that strengthen consumer protections, close regulatory gaps, and prevent future harm to ensure we don’t see a repeat of the collapses of Shield and First Guardian.”
While the SMC is correct that the vast majority of the early CSLR claims were indeed related to SMSFs, this was largely through Dixon Advisory and United Global Capital, and is not the case with the Shield and First Guardian scandals.
Additionally, the trustees of SMSFs are also the members, so any move to levy the SMSF sector would be an even more direct cost to the potential victims of misconduct than the kind that the SMC is concerned about.
The association has also called for tougher laws to around high-pressure sales tactics that convince people to move into risky investments that are unsafe or unsuitable for them, as well as stronger platform and product accountability, regulatory oversight and “making those who cause harm pay to fix it, instead of pushing costs onto others”.
