The Financial Advice Association Australia (FAAA) has stated it is yet to take a definitive position on the proposal to have SMSFs contribute to funding the Compensation Scheme of Last Resort (CSLR) and has described the suggested approach as tricky.
“[The proposal is for] SMSFs as a sector, not the advisers who may advise them, to be brought into the scheme for the purposes of special levies. The minister has said very clearly in this paper that he will not enforce SMSFs paying special levies and there are a number of options in this paper of different ways SMSFs could contribute,” FAAA chief executive Sarah Abood told delegates at the FAAA Roadshow 2026 in Sydney last Thursday.
“One is they’re in via SMSFs choosing to opt in to the CSLR, that they would have access to the CSLR and they would pay a fee for that.
“Or [SMSFs can opt out], which is they are assumed to be in unless they tell [the government] they are out.
“My initial reaction is that’s going to be tricky because the many people who take on SMSFs do it partly for the reason of control and faith in themselves and I wonder how many SMSFs would believe they would ever need access to the CSLR.
“So I’m a little bit sceptical about how many would either opt in or choose to opt out if they were the two options.
“The third proposal is they’re out and our presumption is that they would be out irrespective of whether they had been advised or not.”
Abood acknowledged there is merit in a recommendation to have SMSFs pay a portion of the special levy due to the number of them involved with the Dixon Advisory collapse, but admitted for situations such as the Shield and First Guardian failures there was less justification for this course of action.
“SMSFs are accountable for around 93 per cent of the money that has been paid out of the CSLR already that was in the system. Ninety-three per cent is a lot so there is no doubt SMSFs are a factor here,” she said.
“But I would also add that the biggest amount paid out from the CSLR is for Dixon Advisory and Dixon had a business to set up SMSFs, and we’re not expecting to see anything like that when it comes to Shield and First Guardian.
“So to me this one is tricky. In many ways it would be nice to have a sector paying some more as that would reduce the burden on other sectors, but I can see issues and unintended consequences [with it] as well.”
She called for member feedback to assist the industry body in arriving at a definitive position on the matter as many of the FAAA constituency service SMSFs.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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