By Michelle Huckel, Policy Manager, SIAA
The release of the levy estimate for the CSLR for the Financial Year ending 30 June 2026 has led to widespread outrage in the financial services industry and has resulted in the government announcing a Treasury review to ensure the scheme remains sustainable into the future for consumers and for the industry.
On 31 January 2025, the scheme released its initial estimate of levies for FY 2026 that showed that the personal financial advice sub-sector would be subject to a levy of $70 million – exceeding the sub-sector cap by a whopping $50 million. This estimate exceeded expectations of most in the industry. The key contributors driving the expected number of claims are attributed to Dixon Advisory & Superannuation Services (DASS) and United Global Capital.
The estimated levies for FY 2026 for the other three sub-sectors that are covered by the scheme are:
- $2.80m for credit provision services.
- $2.72m for credit intermediaries.
- $2.34m for securities dealing.
ASIC is allowed to authorise a sub-sector cap of $20 million and the amount above this will require funding via a special levy to be determined by the Minister for Financial Services.
This means that a levy will be issued to those in the personal financial advice sub-sector of $100 per licensee plus $1295 per adviser for the 2026 Financial Year. The Minister for Financial Services will then be required to decide how the remaining $50 million cost blow out will be funded.
This is on top of the levy charged to the personal financial advice sub-sector for the 2025 Financial Year of $100 plus $1,186 per adviser that has already been paid.
A Treasury review of the CSLR was immediately called by the government to consider:
- How the CSLR is delivering on its intended objectives.
- How the CSLR funding model is formulated, including its potential impacts on businesses who fund the industry levy.
- How the powers of the CSLR Operator interact with delivery of the scheme.
- The current scope of the CSLR and any related matters.
The review will also have regard of other reviews and inquiries such as the one currently being conducted by the Senate Standing Committee on Economics into matters relating to the reasons for the collapse of wealth management companies and the implications for the establishment of the CSLR and challenges to its ongoing sustainability.
The CSLR started operations on 2 April 2024 to compensate complainants who have received a determination in their favour from AFCA and the determination amount has not been fully paid by the relevant financial firm. This typically occurs because the relevant financial firm is insolvent, or is likely to become insolvent.
The Scheme provides for the following payments:
- Compensation payments for claims lodged for unpaid AFCA determinations. Claims are limited to $150,000 per complainant.
- Unpaid AFCA fees.
- CSLR operating costs.
- ASIC costs for administering the Scheme levies.
How the levies work
The total levy for each levy period is capped at $250 million, and, in addition, each sub-sector has a $20 million cap unless there is a ministerial determination for a Special Levy to exceed this amount.
The levies have been divided into various categories.
The Pre-CSLR levy covers claims lodged with AFCA between 1 November 2018 (the day AFCA started operating) and 7 September 2022. This levy of $241 million has been funded by the top 10 largest APRA-regulated financial institutions (other than private health insurers and superannuation funds) and covers approximately 1,914 claims. 1,556 of these claims are against DASS lodged with AFCA during this period (these are referred to as Pre-CSLR complaints).
Post- CSLR complaints have been lodged on or after 8 September 2022. These levies are determined annually – except for the first levy period that only ran from 2 April 2024 to 30 June 2024.
The levy for the first levy period of $4.8 million was funded by government. This levy period only ran from 2 April 2024 to 30 June 2024.
The levy for the second levy period of 1 July 2024 to 30 June 2025 of $24.1 million was funded by industry and covers approximately 129 claims (of which 86 are against DASS). Licensees that provide advice to retail clients paid the lion’s share of this levy ($18.5 million): a minimum levy of $100 plus $1,186 per adviser.
Unfortunately, there appears to be no respite to the levies in sight – with the CEO of the scheme recently announcing that he expects the FY27 levy for the financial advice subsector to likely exceed $120 million.
Those wishing to provide feedback to the Treasury review have until 28 February in which to do so. A link to the Treasury review is here.
