Shadow Minister for Financial Services Luke Howarth wants to halve the Compensation Scheme of Last Resort cap to help reduce the cost of advice.
At a breakfast hosted by the Financial Services Council in Sydney on Wednesday morning, Howarth said this was part of the plan to reduce advice costs, along with greater scrutiny of ASIC spending and delivering the Quality of Advice Review recommendations in full.
“I was pretty shocked to even learn about the CSLR and the fact that people have to pay for the mistakes of others,” Howarth said.
“It was crazy to me, but that’s where it’s at. The [Hayne] royal commission happened, but there are ways of reducing costs.”
Howarth also criticised the government for not paying for the full first 12 months of the scheme but instead only covering the final three months of FY24 after the scheme commenced at the start of April.
“The Labor government need to stick to their word around paying for the first 12 months of it, because they’re not,” Howarth said.
“The government said they’d pay for the first 12 months of the cost, and they haven’t. They skimped and paid three months. That’s not good enough.”
Howarth said he would halve the sector cap, bringing it back in-line with what the previous Coalition government had in its originally proposed legislation.
“The original intention was to have it capped at $10 million per year rather than the $20 million that it is,” Howarth said.
“The Coalition will look at that because if you capped it, it would reduce the fees back to about $650 a year as opposed to what it currently is at the moment.”
Each adviser will pay $1286 to cover the FY25 CSLR sector levy of $18.5 million, which is just short of the cap.
For ASIC levy costs, Howarth complimented Senator Andrew Bragg’s work on his review and is open minded on his recommendations, which includes using penalties and fines for cost recovery rather than levies.
“It’s not Coalition government policy that we would adopt all of those recommendations in any way,” Howarth said.
Full review
Howarth re-iterated the Coalition’s position of adopting the QAR in full and criticised the government’s slow approach to policy reform.
The first piece of legislation passed Parliament in early July, more than 18 months after the final report was handed to government in December 2022.
“It’s been 593 days since Stephen Jones was handed the Levy report and not a lot has been done in that time,” Howarth said.
“It’s well over 500 days since they put in the first tranche [of legislation] and we know there was difficulties there.”
Howarth said he doesn’t have a lot of confidence the government will get tranche two right. noting the industry and opposition had worked with the government to get improvements made to the tranche one legislation.
“It’s possible that once again they put it out when everyone’s about to go on leave at Christmas and put out a consultation period then and then come back and rush changes through,” Howarth said. Consultation on the first tranche of legislation was released towards the end of last year and was just one of several other consultations that ran through the holiday break.
Howarth’s lack of confidence not only related to ideological differences, but also to several drafting errors that have plagued the legislative process so far, as well the work the opposition did to back the last-minute amendment to the tranche one legislation.
“There’s not a lot of confidence they’ll get it right, but in saying that as the shadow minister in opposition, I hope for all of you that they get it right,” Howarth said.
“That’s what I want, for them to get it right and make your life easier and in turn make it easier for Australians to get the advice the advice they need.”
Friend of super
Howarth also used the breakfast to position himself as a friend of the broader superannuation industry, rather than antagonist in the mould of Bragg.
“When it comes to superannuation, I believe in it, I think it’s a good thing, it’s a good investment vehicle, it’s there for retirement and I support it,” Howarth said.
“I wouldn’t be coming in to make any big changes or preconceived ideas in that regard. I’m 52, I started salary sacrificing when I was 19 because my old man at the time said put away 80 bucks a month – which was a lot of money back then – and I’ve seen the benefit of that build over time.”
On the sidelines of the event, Howarth clarified to Professional Planner he was a supporter of compulsory superannuation, as opposed to suggestions of a voluntary framework as suggested by Bragg, but with the added stipulation he still believed it should be used for other purposes such as the First Home Super Saver Scheme.
Howarth told the breakfast audience the super system is a good way of reducing the age pension burden on the budget, and there wouldn’t any “big changes in a negative way” to super from a potential future Coalition government, with one exception.
“We would get rid of Div296 if we get in, in the sense that this idea of [taxing] unrealised capital gains is rubbish,” Howarth said, referring to the controversial provision in Labor’s upheaval of the marginal tax threshold in super balances over $3 million.
While he was troubled by media reports of misconduct and alleged corruption in the CFMEU and how it relates to Cbus, Howarth said he didn’t have any ideological issue against industry funds, other than the conflict of interest of using member money for union supported political campaigns which generally targets Coalition candidates.
“It’s been very clear the CFMEU needs to be deregistered and the regulators should be looking at some of what’s gone on there, but for me as a shadow minister, I’m not against industry super funds,” Howarth said.
“Superannuation is there for members; their money should be spent wisely…if you’ve got industry super sponsoring union events to the tune of millions of dollars is that really in the best interest of members?”
Howarth noted that when he got in Parliament, he couldn’t use his SMSF so instead became a member of AustralianSuper. “They were really good,” he said, adding two of his sons have since become members.
“I’m not anti-industry super fund, I just want a level, fair playing field [and] for it be independent,” he said.
