Yesterday, Financial Services Minister Daniel Mulino announced that financial advice will still have to cover 22 per cent of the $47.3 million CSLR special levy, while super fund trustees, responsible entities and other “retail facing” sub-sectors are set to pay based on “ASIC regulatory effect”.
“Supporting consumers includes ensuring the CSLR is there to support them when they need it,” Mulino said.
“A special levy of $47.3m will apply for the financial year 2025-26 to fund the increased call on the CSLR this year. This will be applied broadly to reduce the burden on any one sub-sector and to ensure of the sustainability of individual sub-sectors and the CSLR as whole.”
While the levy is to be spread more broadly than just the financial advice sub-sector, 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.
According to the announcement, the decision for the 2025-26 special levy is “not taken to set a determinative precedent for levy decisions in future years”.
In November, the CSLR published its initial levy estimate for FY27, with the total calculated at $137.5 million.
As is the case with prior CSLR estimates, the financial advice sub-sector is set to bear the lion’s share of the cost at $126.9 million – $106.9 million above the sub-sector cap.
In a fact sheet accompanying the announcement, Treasury said basing the funding option on regulatory effect would “reduce the risk of the special levy impacting the ongoing viability of any sub-sector”, while acknowledging the broader financial system benefits from ongoing consumer confidence generated by ensuring access to last resort compensation arrangements.
It also “leverages an existing framework and metrics for apportioning costs across sub-sectors, enabling application of the levy framework to be efficient, effective, and transparent”.
Impact of Shield and First Guardian
The minister’s announcement also leaned heavily on the damage that the Shield and First Guardian Master Funds have done to the Australian public’s confidence in the financial system.
“We need to ensure consumers continue to have trust in the superannuation system to help them provide for their own retirement,” he said.
“The alleged practices employed in the cases of the Shield and First Guardian Master Funds have highlighted the need for reform.
“Those include high pressure lead generation pushing people to switch their retirement savings into higher risk environments and products such as low-quality managed investment schemes.”
Mulino added that the government is considering “targeted reforms” to deal with the issues across the whole ecosystem, with a consultation expected early next year.
“We want to ensure consumers can be properly informed before making the decision to switch what are now large sums of superannuation savings, and more protected when they switch,” he said.
“Switching to a better performing superannuation fund can significantly improve the retirement outcomes for Australians, however, the decision to move requires careful consideration.”
Mixed responses
Peter Burgess, CEO of the SMSF Association, who participated in an industry roundtable held yesterday in regard to the CSLR, said that the association supports the minister’s decision to address the 2025/26 CSLR funding shortfall by spreading the cost more broadly across sub-sectors.
“We support measures that strengthen consumer protections and promote confidence in Australia’s financial services and superannuation sectors and ensuring the CSLR is adequately funded is an important part of maintaining trust in the system,” Burgess said.
“At the roundtable it was confirmed the inclusion of superannuation trustees as a sub-sector which would contribute to funding of the 2025/26 CSLR funding shortfall levy, would not include SMSFs.”
The Association of Super Funds Australia said the (CSLR) levy risks undermining trust in Australia’s compulsory retirement savings system.
Mary Delahunty, ASFA CEO, said forcing 18 million Aussies who are super fund members to fund the CSLR will set a dangerous precedent.
“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,” Delahunty said.
“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.”
She added that it was wrong in principle to use Australians’ retirement savings to fund compensation for losses in other sectors through the CSLR, because most super fund members cannot benefit from the scheme.
“Super has its own compensation mechanism, already paid for by super fund members under Part 23 of the Superannuation Industry (Supervision) Act. If super fund members suffer losses, it is through those arrangements, not the CSLR, that they may be compensated,” Delahunty said.
“The financial demands on the CSLR are projected to grow again next year. If super fund members are being called on to fund something they can never use, simply because the costs have become unmanageable, then the CSLR needs fixing, and fast.
“It is like being forced to pay for home insurance not only for your own house, but also for someone else’s house in another town.”
ASFA said that as the CLSR’s scope and costs had grown, so had the temptation for the government to shift the funding burden onto well-regulated sectors that already have their own compensation arrangements and no record of leaving losses uncompensated.
“Making the CSLR sustainable requires more than filling its funding gaps. We need to reduce the compensation payable to investors in the first place by preventing the losses they could experience through things like lead generators, aggressive sales tactics, and bad financial advice,” Delahunty said.
“The purpose of the CSLR is evident in the name. It should be an option where all other options have failed. That means preventive measures to protect investors from wrongdoing should be at the forefront of the government’s reform agenda. Put simply, we think prevention is better than compensation.”
Meanwhile, Super Consumers Australia welcomed the announcement stating it “strongly supports the government’s commitment to protecting Australians from being misled or ripped off by financial operators”.
Xavier O’Halloran, CEO of SCA, said the reforms are vital to restoring people’s trust in the financial services sector, particularly for those who left out of pocket through no fault of their own.
SCA also welcomed the special $47.3 million levy for 2025–26 to address the scheme’s current shortfall.
“Protecting the CSLR isn’t just about who pays to compensate the people hurt by bad industry practices. It’s about ensuring the system holds bad actors to account,” O’Halloran said.
“We particularly welcome the principle to spread the cost of the CSLR across the broader retail-facing finance sector and we will engage with the detail as it emerges. It’s a sensible approach that protects Australians and avoids placing the full burden on any one group.”
O’Halloran said the failures of cases like Shield and First Guardian show the urgent need to tighten protections across the super and investment landscape.
“Consumers should be able to trust that switching funds, especially when encouraged to do so, won’t land them in higher risk, low-value products. Today’s steps are a clear recognition of that risk, and a clear shift toward better protections,” he said.
Sarah Abood, CEO of the Financial Advisers Association Australia, said the impact of the allocation basis is an additional $10.4 million levy for financial advisers – in addition to the $20 million that financial advisers have already paid in CSLR levies this year.
“This represents the biggest single allocation of the special levy to any sector. In total, financial advisers will pay $30.4 million this year – 45 per cent of the total levy of $67.3 million. Using ASIC’s adviser numbers of 15,041, that’s an extra almost $700 per adviser – taking the total cost this year to over $2,000 per adviser. This takes no account of the likely substantial decline in adviser numbers at the end of this year,” she said.
“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.
“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.”
Abood added the FAAA also urges the minister to confirm financial advisers will not be asked to pay the CSLR levy on the same basis in future years.
“We welcome the minister’s commitment to make changes to the CSLR to put it on a fairer and more sustainable footing, and also his commitment to make decisions that will reduce the prospect of future financial collapses impacting the CSLR,” she said.
“We would add that these issues have been known for some time, and the need is urgent to make decisions that will protect consumers and ensure compensation continues to be available into the future.”
