Peter Burgess, CEO of the SMSF Association, said the proposal by assistant treasurer Daniel Mulino to force the superannuation sector to compensate victims of bad financial advice is not “sustainable or fair” for such a disproportionate share of the cost of the CSLR to be imposed on a single sub-sector.
Mulino was reported in the mainstream media saying super funds are included as one of the options of the sectors that could be included [in supporting the CSLR].
“There’s a section under the law which basically allows me to distribute that, taking into account a range of factors, including things like capacity to bear, ease of calculation, repeatability, the extent to which it relates to involvement in the actions themselves,” Mulino was quoted as saying.
Burgess said that while the SMSFA supports the cost being spread more widely and fairly this can only be achieved by ensuring the sub-sectors in which the misconduct occurs are included in the scheme.
“The current CSLR does not reflect this shared responsibility as it excludes product manufacturers, including managed investment schemes (MISs),” he said.
“We believe this is a significant flaw in the scheme, given that manufacturers whose products are poorly designed and improperly fail do not contribute to the funding of the CSLR, yet they continue to cause significant consumer financial detriment.”
He added that including the SMSF sector in such a scheme would create an unacceptable risk of moral hazard.
Phil Anderson, general manager, policy, advocacy and standards for the Financial Advisers’ Association Australia, said he believes the comment from the assistant treasurer was in respect to any super funds being part of a broad distribution of the special levy.
“I don’t think he was specifically specialling out super funds, but the ability to issue a levy only applies to sectors that are covered by the Australian Financial Complaints Authority, so SMSFs would be excluded,” he said.
“Obviously, service providers to SMSFs that are covered by AFCA, such as financial advisers would still be caught or could be covered as part of a special levy, but it would not include the SMSF themselves.”
Anderson continued that superannuation funds are already levied for the ASIC funding levy, so this would be another levy that is related to the necessity of doing business.
“We appreciate that there are specific obligations, such as the best financial interest duty that applies to super funds, but it’s just like any other entity. Ultimately, if they make a contribution to the CSLR special levy, then that has to come from clients,” he said.
“In the short term, businesses can reduce their profit margins, but in the long term, they’ll seek to recover it from clients, so it makes no difference whether we’re talking about super fund members, about the banks contributing, insurers contributing, in all cases, it’s going to come from clients.”
He continued that he does not believe super fund members should be treated differently from other clients that ultimately might be expected to pay for the cost of the CSLR.
“When it comes to super funds whilst some of the historical matters which are more SMSF related, the connection to super funds is not so strong. Certainly, when we talk about Shield and First Guardian, we’re talking about mainstream platforms that were contributing significant factors to the losses,” he said.
“Equally, the argument can be, why are risk advisers paying for poor advice that’s provided by supervisors. This issue across cross-subsidy is an issue whether we’re talking about between sectors or within sectors. The practical reality, the thing that the FAAA has long argued, is that this special levy should be allocated as broadly as possible and on the basis of capacity to pay.”
The government is planning to announce how the 2026 financial year levy will be spread across the industry and broader changes to the CSLR at an industry meeting in early December.
Natasha Panagis, head of technical services for the Institute of Financial Professionals Australia, said the institute remains “seriously concerned” about the CSLR and has called on the government to urgently reform the scheme to ensure it is fair, financially sustainable, and consistent with its original intent.
“Without prompt action, the rising costs threaten the viability of small advice practices and could further restrict consumer access to quality financial advice,” Panagis said.
What ever happened to due diligence of the investor? And why are not the directors made responsible when their businesses fail?
It doesn’t seem to matter what extra red tape is levied upon all of us, be it personally or in business, the bad guys still get away and the naive or risk-aware are compensated. I do know and understand that sometimes it is not the member who failed in due diligence, but I am also aware that many take on high risk for high returns then expect everyone to pick up the pieces.
It just irks me that there is more and more red tape with ever decreasing productivity and the government is always seeking ever more.
Instead of red tape how about this. We go back to the old days when instead of box ticking and licence and administration fees for everything (read “more government jobs”), we actually have officers that visit businesses, or drill down through financials, and following appropriate warnings, shut them down either permanently or until they conform to the norms.
It also irks me that fines are also retained by the government instead of being passed on to innocent and knowledgeable clients. Instead, the government wants to let off the directors or can’t be bothered chasing them or can’t because of legal loopholes, and the rest of us have to compensate the victims either directly or through taxes. Or, how about using some of those funds to close loopholes and make people accountable before they cause damage to people and their futures.
Something needs to be done, but not what is being discussed.