The significant increase in the Compensation Scheme of Last Resort (CSLR) levy on the financial advice sector has prompted renewed calls for the government to co-fund the scheme and make structural changes to ensure costs are allocated to those who cause harm.
The SMSF Association noted a $63.4 million jump in the levy estimate for the financial advice subsector had pushed it to $190.3 million, a substantial increase on the subsector’s levy cap of $20 million.
Association chief executive Peter Burgess said the revised estimate highlighted the large and uneven burden placed on the financial advice profession and holding it accountable for the failures of firms that prioritised profit to the point it harmed clients was unsustainable and unjust.
“It also demonstrates that the current design is creating moral hazard, contributing to the increasing scale of potential CSLR liabilities being borne by the retail financial advice sector,” Burgess said.
Burgess reiterated calls for the government to help fund the shortfall, given it set, maintained and enforced the regulatory settings scheme participants must operate within.
He also pushed for claims to be paid on a capital-loss basis only and for the inclusion of managed investment schemes as a new subsector that funded the levy, given its part in contributing to large-scale losses before the scheme.
Financial Advice Association Australia policy, advocacy and standards general manager Phil Anderson supported the call for the levy to be shared across other sectors, but went a step further in pushing for a hard cap to be applied to the advice sector.
“We urge the government to cap the total CSLR levy (annual plus special levy) so that financial advisers pay no more than $20 million until we have a sustained increase in adviser numbers. This will ensure Australians do not miss out on the advice they need,” Anderson said.
“The Albanese government has shown admirable willingness to provide targeted support for essential industries that are facing significant headwinds.
“For example, in May 2026, it suspended the commercial broadcasting tax for a further two years, delivering $111.3 million in savings for the commercial broadcasting sector. We urge the government to show a similar commitment to financial advisers.”
Stockbrokers and Investment Advisers Association chief executive Maria Lykouras said the $190 million levy estimate demonstrated the unsustainability of the CSLR and the need for it to be redesigned.
“Now that the scheme is in its third year of operation, its shortcomings are obvious. Alarmingly, the estimate shows that the fees incurred to run the scheme in FY2027 exceed the entire personal financial advice subsector cap of $20 million,” Lykouras said.
She was also critical of the ‘but for’ losses that cover investors’ unrealised profits, pointing out 80 per cent of claims paid to Dixon Advisory complainants, totalling around $83.4 million, fell into this category.
“Compensating counterfactual outcomes extends beyond the role of a last-resort safety net. The scheme must be redesigned to remove the payment of ‘but for’ losses to improve its sustainability and ensure that it helps as many impacted consumers as possible be restored to their previous position by compensating them for their capital loss,” she said.
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason