The Compensation Scheme of Last Resort (CSLR) has announced the initial levy estimate for the 2027 financial year is $137.5 million, which represents an 82 per cent increase when compared to the revised estimate for 2025/26 of $75.7 million.
Of that $137.5 million, $126.9 million relates to financial advice. As that amount exceeds the $20 million sub-sector cap, a revised estimate will be announced in June 2026.
The estimate does not include the impact of the Shield and First Guardian collapses.
“The rate and scale of firm failures aren’t slowing. The number of impacted consumers continues to rise and the proportionate negative impact caused by a relative few remains significant,” CSLR chief executive David Berry noted.
“Right now, there are too many uncertainties to reliably estimate the potential impact of Shield and First Guardian on the scheme.”
The industry immediately expressed its concerns over the large levy estimates and the burden placed on advice providers, with both the Financial Advice Association Australia (FAAA) and Financial Services Council (FSC) calling for the cost of the scheme to be brought to sustainable levels.
“We have been saying for some time that it is imperative that financial advisers should not pay more than the $20 million sector cap, which is already very high, particularly when you bear in mind that the vast majority of this levy is paid by small, privately owned firms with very limited capacity to absorb extra costs. We urge the government to make urgent and significant changes to the CSLR to ensure fairness and sustainability,” FAAA chief executive Sarah Abood said.
FSC chief executive Blake Briggs recognised the critical role of the CSLR in protecting Australians who experience serious financial hardship as a result of financial advice failures, but called for the program to remain true to label.
“The scheme must be reformed to ensure it remains genuinely ‘last resort’ and targeted towards those most in need,” Briggs indicated.
Further, the industry body indicated the revised estimate to be published next year is likely to be materially higher than $137.5 million given the emerging volume of potential Shield and First Guardian-related claims and the Australian Financial Complaints Authority’s recent acceleration in progressing its backlog of consumer actions.
“This is another blow to law-abiding financial advice businesses who face continued cost pressures and who will again be called on to pay up to the $20 million sector sub-cap, and potentially above it, for the wrongdoing of others,” Briggs explained.
Further, the FSC reiterated its opposition to normalising the use of ‘special levies’ as a routine funding mechanism, pointing out the wider financial services sector is willing to do its part to meet the existing shortfall provided the costs are distributed widely and fairly.
